📊 SaaS LTV Calculator

SaaS lifetime value is ARPA times gross margin divided by monthly churn. At $99 ARPA, 80 percent margin, and 3 percent monthly churn, LTV is $99 x 0.80 / 0.03 = $2,640. Against a $400 CAC the LTV:CAC ratio is 6.6:1, comfortably above the 3:1 rule. This calculator prices every customer and judges whether acquisition math works.

LTV is the ceiling on what you can spend to acquire a customer. Every growth decision, channel mix, sales hiring, pricing, is really a bet about this number. Companies that do not know their LTV are guessing at the most expensive question in the business.

How to Use This Calculator

Enter average revenue per account per month, gross margin percent, monthly logo churn, and fully loaded CAC. Use logo churn for this formula; revenue churn needs the expansion-adjusted version.

The SaaS LTV Formula

The formula assumes churn is constant, which makes expected lifetime 1/churn: 3 percent monthly churn means 33.3 months average. Gross margin belongs in the numerator because only gross profit pays back acquisition; revenue that flows to hosting costs does not. The 3:1 LTV:CAC rule demands a cushion for the formula’s simplifications: churn varies by cohort, and early months churn hardest.

Use logo churn here, not revenue churn. Losing 3 percent of logos while revenue churn is 1 percent (because big accounts stay) describes an SMB-heavy base with enterprise stability; the blended LTV sits between the two. Segment LTV by plan tier whenever the data allows.

Worked Example

$99 ARPA, 80 percent margin, 3 percent monthly churn, $400 CAC. LTV = $99 x 0.80 / 0.03 = $2,640. Lifetime = 33.3 months. LTV:CAC = 6.6:1. Payback = $400 / $79.20 = 5.1 months. Every metric is healthy: fast payback, wide ratio, long lifetime.

Churn crisis version: churn rises to 8 percent while ARPA, margin, and CAC hold. LTV = $79.20 / 0.08 = $990, less than half the original. The LTV:CAC ratio falls to 2.48:1, below the 3:1 bar, and expected lifetime shrinks to 12.5 months. Same acquisition spend, same product, but the business is now fragile. Churn moves LTV more than any other input, which is why retention is the highest-ROI team in SaaS.

What Moves LTV Most

Churn dominates because it sits in the denominator: small absolute moves swing LTV violently. That is the mathematical case for investing in onboarding, support, and product stickiness ahead of acquisition. A dollar of retained revenue is worth more than a dollar of new revenue because it arrives without CAC. For the full operating picture, our SaaS metrics calculator adds MRR, NRR, and growth efficiency to this LTV foundation.

Cohort LTV: Why Blended Lies

Blended LTV averages your best and worst customers into a fiction. Cohort analysis splits by signup month, plan tier, and acquisition channel: January’s cohort at $3,100 LTV, June’s at $1,900 because a discount campaign pulled in churn-prone buyers. The blended $2,640 hides that the discount cohort destroys value at its CAC. Kill the campaign, keep the blended number, and you have fixed the business while the dashboard barely moves.

Build the habit: every growth experiment reports its cohort’s LTV:CAC at 6 and 12 months, not its signup count alone. Channels, plans, and campaigns each earn their own economics. The companies with the best unit economics are usually just the ones that stopped averaging away their worst cohorts. Segmentation is not analytics theater; it is where the profit hides.

LTV and Expansion: The NRR Bridge

The basic LTV formula assumes flat ARPA, but expansion revenue changes the picture: customers who upgrade are worth more than their starting ARPA suggests. With net revenue retention above 100 percent, effective LTV exceeds the formula’s output, sometimes dramatically. The bridge: divide ARPA by (churn minus expansion rate) instead of churn alone. At 3 percent churn and 1 percent expansion, the divisor is 2 percent and LTV jumps 50 percent.

This is why investors prize NRR above 110: it is LTV expansion hiding in a retention metric. But expansion must be profitable expansion: discounted upgrades that bloat NRR while thinning margin are vanity. Check expansion against gross margin per account, not revenue alone. Real expansion grows profit; fake expansion grows the dashboard.

LTV-Adjusted Pricing

LTV should inform pricing, not marketing spend alone. If enterprise tier LTV is $15,000 at 90 percent margin while SMB is $2,000 at 70 percent, the sales team’s time belongs upmarket even at equal close rates. Price tiers to push the mix toward high-LTV segments: packaging, minimums, and annual-only plans are LTV levers disguised as pricing decisions.

The annual-plan discount is the cleanest example: 20 percent off for yearly prepay trades margin for retention, and retention usually wins the LTV math. Compute both versions before setting the discount: if the churn improvement covers the haircut, it is profitable generosity. Pricing is applied unit economics; run the numbers like it.

Estimates for planning only, not financial advice.