BUSINESS
LTV Calculator - Customer Lifetime Value
By Worldtickers ·
Estimate how much revenue each customer generates over their entire relationship with your business.
This ltv tool focuses on estimate how much revenue each customer generates over their entire relationship with your business. Use it to turn operating metrics into practical business insight by entering costs, revenue, customers, margins, or growth assumptions and reviewing the numbers behind better decisions.
Calculator
LTV Calculator
Estimate customer lifetime value, LTV/CAC ratio, and payback period.
What Is Customer Lifetime Value?
Customer Lifetime Value (LTV or CLV) is the total net profit or revenue a business can expect to earn from a single customer over the entire duration of their relationship. It answers the fundamental question every business owner needs to know: how much is a customer actually worth? Without this number, you cannot make informed decisions about how much to spend on acquisition, which customer segments to prioritize, or whether your business model is sustainable in the long run.
LTV is the counterweight to Customer Acquisition Cost (CAC). While CAC tells you how much you spend to get a customer, LTV tells you how much that customer returns. The relationship between these two metrics determines the fundamental health of your business. A company with high LTV and low CAC is a money machine. A company with low LTV and high CAC is burning through capital. Every strategic decision — pricing, product development, marketing spend, customer success — should be evaluated through the lens of how it impacts this ratio.
LTV varies dramatically across business models. A subscription SaaS company with low churn and strong expansion revenue can achieve LTVs in the thousands. A transactional e-commerce business with no recurring revenue may have an LTV equal to just a few transactions. A freemium mobile app might have an LTV under $10. Understanding your specific LTV — and the levers that move it — is essential for building a defensible, profitable business.
The power of LTV lies in its forward-looking nature. Unlike metrics that tell you what happened last month, LTV helps you project the long-term value of today's acquisition decisions. When you know a customer is worth $2,000 over their lifetime, you can confidently spend $500 to acquire them and still generate substantial profit. This clarity transforms marketing from a cost center into a strategic investment.
How to Use This Calculator
Enter your average revenue per customer per month, your gross margin percentage, and your monthly churn rate. The calculator computes your customer lifetime value and shows you the relationship between these variables. You can adjust each input to see how changes in pricing, retention, or margins impact the total value of each customer.
Step 1: Average Revenue Per Customer
Calculate the average monthly revenue per customer. For subscription businesses, this is your average monthly recurring revenue per account. For transactional businesses, multiply average order value by purchase frequency per month. For hybrid models, combine subscription revenue with average transaction revenue.
Step 2: Gross Margin
Enter your gross margin as a percentage. Gross margin is revenue minus cost of goods sold (COGS), divided by revenue. For SaaS, this is typically 70-90% since the marginal cost of serving an additional customer is low. For physical products, margins are lower. Include hosting, support, and direct service costs in your COGS for an accurate margin.
Step 3: Monthly Churn Rate
Enter the percentage of customers who cancel or stop purchasing each month. Calculate this by dividing customers lost in a month by total customers at the start of the month. A 5% monthly churn means you lose 5 out of every 100 customers each month. Small reductions in churn have outsized effects on LTV.
Formula
The core LTV formula for subscription businesses is:
LTV = (Average Monthly Revenue × Gross Margin) ÷ Monthly Churn Rate
Customer lifetime is derived from churn: Customer Lifetime = 1 ÷ Monthly Churn Rate. So a 5% monthly churn equals a 20-month average lifetime. The formula multiplies what a customer pays each month, adjusted for the portion that is profit (gross margin), by how long they stay.
For businesses with expansion revenue, a more complete formula is:
LTV = (Base Revenue + Expansion Revenue − Churn Losses) × Gross Margin ÷ Churn Rate
The LTV-to-CAC ratio ties it all together:
LTV:CAC = Customer Lifetime Value ÷ Customer Acquisition Cost
A ratio of 3:1 or higher indicates sustainable, profitable growth. Below 1:1 means you are losing money on each customer.
Examples
Example 1: SaaS Subscription
A SaaS company charges $80/month per customer with 85% gross margin and 4% monthly churn. LTV = ($80 × 0.85) ÷ 0.04 = $1,700. Customer lifetime is 1 ÷ 0.04 = 25 months. If CAC is $400, the LTV:CAC ratio is 4.25:1 — well above the 3:1 benchmark. Reducing churn to 3% would push LTV to $2,267 and the ratio to 5.7:1, demonstrating the outsized impact of retention improvements.
Example 2: E-commerce Business
An online store has an average order value of $60, customers purchase 1.5 times per month, gross margin is 40%, and monthly retention is 90% (10% churn). Monthly revenue per customer is $90. LTV = ($90 × 0.40) ÷ 0.10 = $360. Customer lifetime is 10 months. If CAC is $30, the ratio is 12:1 — excellent. But if churn increases to 20%, LTV drops to $180, and the ratio falls to 6:1. Churn doubled and the value of each customer halved.
Example 3: Impact of Expansion Revenue
A B2B SaaS starts customers at $100/month. Over two years, average expansion adds $30/month through tier upgrades and add-ons. The blended average is $130/month. With 80% gross margin and 3% churn, LTV = ($130 × 0.80) ÷ 0.03 = $3,467. Without accounting for expansion, LTV would be $2,667. Expansion revenue adds $800 in value per customer — a 30% increase. Ignoring expansion revenue understates customer value and can lead to underinvesting in acquisition.
Tips
Segment Your LTV by Customer Cohort
Aggregate LTV masks important differences. Customers acquired through organic channels often have higher LTV than paid channels. Enterprise customers may have dramatically different LTV than self-serve customers. Cohort-based LTV analysis — tracking LTV for customers who signed up in each month — reveals trends that averages hide. If recent cohorts have lower LTV, your growth may be attracting lower-value customers.
Focus on Churn Reduction
Reducing churn is the highest-leverage way to increase LTV. Cutting monthly churn from 5% to 4% increases customer lifetime from 20 to 25 months — a 25% LTV increase with the same revenue per customer. Invest in onboarding, customer success, product stickiness, and reducing friction before spending more on acquisition.
Use Profit-Based LTV, Not Revenue
Revenue-based LTV can be misleading. Two customers generating $10,000 in revenue may have vastly different profitability if one requires heavy support and the other is self-serve. Gross margin-adjusted LTV reflects the true economic value and makes your CAC comparison meaningful. Always use the margin-adjusted version for strategic decisions.
Revisit LTV After Pricing Changes
Any pricing change — increases, decreases, new tiers, or plan restructuring — immediately impacts LTV. Recalculate after giving the change enough time to affect churn patterns (typically 2-3 months). A price increase that raises revenue but also increases churn may have a net negative impact on LTV that is not immediately obvious.
FAQ
What is a good LTV for a SaaS company?
A good LTV for a SaaS company depends on the price point, but the most important benchmark is the LTV-to-CAC ratio. A healthy SaaS business typically maintains an LTV that is at least three times its CAC. For absolute numbers, B2B SaaS companies often target LTVs between $1,000 and $10,000+ depending on contract size. The key is ensuring your LTV significantly exceeds your CAC and that both metrics are trending in the right direction over time.
How do I calculate customer lifetime value?
The simplest LTV formula is: LTV = Average Revenue Per Customer × Gross Margin × Customer Lifetime. Customer Lifetime equals 1 divided by churn rate. For example, if your average customer pays $100/month with 80% gross margin and 5% monthly churn, LTV = $100 × 0.80 × (1 ÷ 0.05) = $1,600. More sophisticated models include discount rates and expansion revenue, but this formula captures the core economics.
What is the difference between LTV and CLV?
LTV (Lifetime Value) and CLV (Customer Lifetime Value) are the same metric — they are used interchangeably in business contexts. Both measure the total net profit or revenue a business can expect from a single customer over the entire duration of their relationship. Some practitioners distinguish between revenue-based LTV (total revenue) and profit-based LTV (revenue minus costs), but both terms refer to the same concept.
Should I use gross margin or revenue in my LTV calculation?
Use gross margin for the most accurate picture of customer profitability. Revenue-based LTV tells you how much a customer spends, but profit-based LTV tells you how much they are actually worth to your bottom line. A customer who spends $1,000 but costs $900 to serve is far less valuable than one who spends $500 but costs $50. Gross margin LTV gives you the real economic value and makes your LTV:CAC comparison meaningful.
How does churn rate affect LTV?
Churn rate is the single most impactful variable in LTV calculations. Since customer lifetime equals 1 ÷ churn rate, even small changes in churn have dramatic effects. Reducing monthly churn from 5% to 3% increases customer lifetime from 20 months to 33 months — a 65% increase in LTV with the same revenue per customer. This is why retention investments often deliver higher ROI than acquisition spending.
What is expansion revenue and how does it affect LTV?
Expansion revenue is additional revenue from existing customers through upsells, cross-sells, tier upgrades, or increased usage. It increases LTV beyond what initial contract value alone would suggest. A customer who starts at $50/month and grows to $200/month over two years has a much higher LTV than a static $50/month customer. Including expansion revenue in your LTV calculation gives a more realistic picture of customer value, especially for SaaS businesses with land-and-expand models.
How often should I recalculate LTV?
Recalculate LTV quarterly at a minimum, and monthly if your business is scaling rapidly. Churn rates, average revenue per customer, and gross margins all shift as your business evolves. A quarterly recalculation keeps your LTV current and ensures your CAC targets and growth investments remain aligned with actual customer economics. If you make a significant pricing change or launch a new retention initiative, recalculate immediately.
Can LTV be negative?
LTV can be negative if the cost to serve a customer exceeds the revenue they generate. This happens when gross margins are negative (cost of goods sold exceeds revenue), churn is extremely high, or customer support costs are not properly allocated. A negative LTV means you lose money on every customer you acquire, regardless of how cheaply you acquire them. If your LTV is negative, the immediate priority is fixing unit economics before investing in growth.