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LTV / SAAS

Customer lifetime value (LTV) calculator

Work out customer lifetime value for a subscription business: average revenue per customer × gross margin ÷ monthly churn, with the expected customer lifetime.

By the CalcBloc teamLast verified Updated

Your details

01Customers

Revenue minus hosting, support and other costs of serving customers.

Customer lifetime value

$4,000

$80.00 margin a month for 50.0 months

Average customer lifetime
50.0 months
Gross margin per customer per month
$80
Lifetime revenue (before costs)
$5,000
  • LTV = ARPA × gross margin ÷ monthly churn rate. 1 ÷ churn is the average customer lifetime in months when the same share of customers leaves every month.
  • Revenue LTV (before costs) would be $5,000; using gross margin gives the profit a customer contributes, which is what you can spend to acquire one.
  • Assumes constant ARPA and churn. Expansion revenue raises LTV and is not included; a churn of 2% a month is 21.5% a year.

Customer lifetime value: $4,000 $80.00 margin a month for 50.0 months

How LTV is built
Show the breakdownValue
Revenue per customer per month (ARPA)$100
× gross margin (80%)$80
Expected lifetime (1 ÷ 2% churn)50.0 months50
Customer lifetime value (LTV)$4,000

$4,000

$80.00 margin a month for 50.0 months

How it's calculated

Customer lifetime value (LTV) estimates the gross profit an average customer brings in over the whole time they stay. For a subscription business it depends on three numbers: average revenue per account (ARPA) each month, gross margin, and churn. If the same share of customers leaves every month, the average customer stays 1 ÷ churn months.

The formula is the one David Skok published in his SaaS metrics guide: LTV = ARPA × gross margin % ÷ churn rate.David Skok, For Entrepreneurs

The formula

  1. Monthly margin per customer = ARPA × gross margin
  2. Average lifetime (months) = 1 ÷ monthly churn
  3. LTV = monthly margin per customer ÷ monthly churn = ARPA × gross margin ÷ churn

Worked example

A customer paying $100 a month at an 80% gross margin contributes $80 a month. At 2% monthly churn the average customer stays 50.0 months, so LTV is $4,000.

$100 ARPA, 80% margin, 2% churnLTV / 80% MARGIN
LineValue
Revenue per customer per month (ARPA)$100
× gross margin (80%)$80
Expected lifetime (1 ÷ 2% churn)50
Customer lifetime value (LTV)$4,000

Cutting churn to 1% doubles the average lifetime and LTV to $8,000; raising ARPA to $120 at 2% churn gives $4,800.

Assumptions and limitations

  • Constant ARPA and churn. Expansion revenue raises real LTV; churn that falls as customers age does too.
  • No discounting. Margin earned years from now is worth less than margin today; with low churn the simple formula can give very long, uncertain lifetimes.
  • Gross margin, not revenue. Revenue LTV (also shown) overstates what a customer is worth for comparing with acquisition cost; see the LTV:CAC calculator.
FAQ

Questions people ask

How do you calculate customer lifetime value?

For a subscription business, LTV = average revenue per account per month × gross margin ÷ monthly churn rate. A customer paying $100 a month at 80% gross margin contributes $80 a month; at 2% monthly churn the average customer stays 50 months, so LTV is $80 × 50 = $4,000.

Why divide by the churn rate?

If the same share of customers leaves every month, the average customer stays 1 ÷ churn months: 2% churn means an average lifetime of 50 months, 5% means 20. Multiplying monthly margin by the average lifetime is the same as dividing it by the churn rate.

Should LTV use revenue or gross margin?

Use gross margin when you compare LTV with acquisition cost. Revenue includes the cost of hosting, support and serving the customer, which you never get to spend on acquiring new ones. Revenue LTV is useful as a measure of how much customers pay in total, and the calculator shows it too.

What if my churn is very low?

With very low churn the formula gives very long lifetimes and large LTVs, which are uncertain because few businesses can predict a customer relationship decades ahead. Many teams cap the lifetime, for example at five years, or discount future margin. If churn is zero, the formula has no finite answer.

How does expansion revenue affect LTV?

The simple formula assumes revenue per customer stays flat. If customers upgrade over time, LTV is higher than the formula suggests; if net revenue retention is above 100%, revenue from a cohort grows despite churn. Treat the simple LTV as a conservative estimate in that case.

Sources

  1. David Skok, For EntrepreneursSaaS Metrics 2.0 – Detailed Definitions (LTV, CAC, months to recover CAC) · retrieved 2026-10-20

By the CalcBloc teamLast verified Updated

How every figure is checked: methodology.