Plainhub
Free tool

Customer lifetime value calculator

Customer lifetime value (LTV, also written CLV) is the gross profit a customer is expected to produce before they leave. It is calculated as monthly revenue per customer times gross margin, divided by monthly churn. This calculator also returns your LTV:CAC ratio and CAC payback from the acquisition cost you enter. Nothing stored.

LTV
€3,200
margin-adjusted
Avg lifetime
33.3
months
LTV : CAC
8.0x
3x or better is healthy
CAC payback
4.2
months to recover CAC

At 3x or above the unit economics support spending more to acquire customers, as long as CAC payback stays inside your runway.

Track cash, burn and runway live in Plainhub.Build your modelTry the live demo

The LTV formula

LTV is the gross profit one customer produces before they leave: monthly revenue per customer times gross margin, divided by monthly churn. At 3 percent monthly churn the average customer stays about 33 months. The usual error is using revenue instead of gross margin, which overstates what a customer is worth and justifies spending you cannot afford.

average lifetime = 1 / monthly churn rate
LTV              = ARPA x gross margin x average lifetime
LTV : CAC        = LTV / cost to acquire a customer
CAC payback      = CAC / (ARPA x gross margin)

David Skok's SaaS metrics guide says the best SaaS businesses have an LTV to CAC ratio higher than 3, sometimes as high as 7 or 8, and calls these figures guidelines rather than rules.

Churn does the heavy lifting. At 3 percent monthly churn the average customer stays about 33 months; at 6 percent it is 17. Halving churn does more for LTV than any price increase you are likely to get away with, which is why retention work usually beats acquisition work in an early SaaS.

Use gross margin, not revenue. Counting the full subscription price as lifetime value ignores hosting, support and payment fees, and produces a number that justifies spending you cannot actually afford. For the wider picture, read the 12 SaaS metrics that matter and what is MRR.

Common questions

How do you calculate customer lifetime value?

Multiply the average monthly revenue per customer by your gross margin, then divide by your monthly churn rate. LTV = (ARPA x gross margin) / churn. The churn rate is what sets the average customer lifetime: 3 percent monthly churn means the average customer stays about 33 months.

What is the LTV formula for SaaS?

LTV = (average revenue per account x gross margin %) / monthly churn rate. Using gross margin rather than raw revenue matters, because the cost of hosting and supporting a customer is money you never keep.

What is a good LTV to CAC ratio?

Three to one is the widely used benchmark. Below 1x you lose money on every customer acquired. Between 1x and 3x the business works but has little room to fund growth. Above 3x the unit economics support spending more on acquisition, provided CAC payback fits inside your runway.

What is CAC payback period?

The number of months of gross profit needed to recover what you spent acquiring a customer: CAC / (ARPA x gross margin). Under 12 months is generally considered healthy for SaaS. It matters more than LTV:CAC for an early startup, because it is measured in cash and time you actually have.

Why does LTV go to infinity when churn is zero?

The formula divides by churn, so zero churn implies customers stay forever and lifetime value is unbounded. In practice no cohort has zero churn. If your measured churn is zero, your sample is too small or your window is too short, so use a longer period.

Compare payback with the cash you have

Compare the payback estimate with your remaining cash runway before increasing acquisition spend. Plainhub tracks runway from the income and costs you record, so you can review that cash constraint as figures change. Calculate LTV and payback here using your own churn, margin and acquisition records.

Build your modelCheck your runway