LTV Calculator
Estimates the total revenue a business expects from a single customer over the entire duration of the relationship by multiplying average monthly revenue by average customer lifespan.
Solid LTV — compare against CAC for sustainability.
Why LTV Calculator Matters
LTV sets the ceiling for how much you can afford to spend acquiring customers. If your LTV is $2,400, a $300 CAC gives a comfortable 8:1 ratio. But a $1,500 CAC leaves only $900 in lifetime gross profit before other costs. The SaaS industry benchmark is a LTV:CAC ratio of at least 3:1, and top-quartile companies achieve 5:1 or higher by improving retention and expanding revenue per account.
Example Calculation
A project management SaaS charges $79/month per team. The average team stays for 18 months before churning or upgrading. LTV = $79 × 18 = $1,422. CAC is $400. LTV:CAC = 3.6:1 — solid. If they improve onboarding and reduce churn so the average lifespan grows to 24 months, LTV jumps to $1,896 and the ratio becomes 4.7:1. That improvement — 6 extra months of retention — is worth $474 per customer without touching acquisition at all.
Practical Tips
- LTV based on average lifespan is a simplified model. For accuracy, use cohort-based LTV: track what each signup cohort actually generates over 12, 24, and 36 months. This reveals how LTV changes for different acquisition channels and time periods.
- Account for gross margin in your LTV calculation when comparing to CAC. If your gross margin is 70%, an LTV of $2,000 only contributes $1,400 in actual gross profit — use the gross-margin-adjusted figure for LTV:CAC ratio calculations.
- LTV improvements from retention compound over time. Cutting monthly churn from 5% to 3% extends average customer lifespan from 20 months to 33 months — a 65% increase in LTV without any price changes.
- Segment LTV by customer type. Enterprise customers often have 3–5× the LTV of SMB customers, but may also have 3–5× the CAC. Knowing LTV by segment reveals which customer profile is actually most profitable.
Frequently Asked Questions
- Customer Lifetime Value (LTV or CLV) = Average Revenue per Period × Average Customer Lifespan. It estimates the total revenue one customer will generate before they leave. For subscription businesses, lifespan is typically measured in months.
- 3:1 is the widely accepted minimum benchmark — meaning you earn $3 for every $1 spent acquiring a customer. Below 1:1 means you spend more to acquire than you earn. Above 5:1 may indicate you are underinvesting in growth and leaving market share on the table.
- Four main levers: (1) Reduce churn through better onboarding and customer success. (2) Increase average revenue per account via upsells and add-ons. (3) Raise prices for new customers. (4) Improve product stickiness so switching costs are high. Retention improvements usually have the highest ROI.
- They are the same metric with different acronyms. LTV (Lifetime Value) and CLV (Customer Lifetime Value) both describe the total expected revenue from a single customer relationship. Some teams use CLTV to be even more explicit.
- Dramatically. Average customer lifespan = 1 / monthly churn rate. At 5% monthly churn, average lifespan = 20 months. At 2% churn, it doubles to 50 months. Halving your churn rate can more than double LTV — no price increase required.
- Yes, when comparing LTV to CAC. Raw LTV overstates value because it does not account for the cost of serving the customer. Gross-margin LTV = LTV × Gross Margin %. This gives you the true profit contribution per customer to measure against acquisition cost.
Disclaimer
These tools provide estimates for informational purposes only. Results should not be used as the sole basis for financial, business, or legal decisions. Always consult qualified professionals for advice specific to your situation.