Customer Lifetime Value (LTV) Calculator
Calculate the total profit a customer generates over their relationship with you. Compare LTV to CAC to measure business health.
Unit Metrics
Cumulative Value vs Cost
Health Check
Healthy Unit Economics
LTV:CAC Ratio
Your ratio is 4.0x. Investors look for 3x or higher. If lower, reduce CAC or reduce Churn.
Payback Speed
You recover your ad spend in 5.0 months. Under 12 months is great for cash flow.
Profit Ceiling
Each customer is worth $800 in gross profit. This is your absolute limit for spending on support and retention.
Execution Steps
Enter your Average Revenue Per User (ARPU). For SaaS, this is MRR per user.
Enter your Gross Margin %. (Revenue minus Cost of Goods/Service).
Enter your Monthly Churn Rate %. (Percentage of customers who cancel).
Enter your Customer Acquisition Cost (CAC).
The chart shows when a customer becomes profitable (Payback Period).
Pro Strategy
- Churn is the LTV killer. Reducing churn from 5% to 2.5% doubles your LTV immediately.
- Don't ignore margin. Revenue LTV is vanity; Gross Profit LTV is sanity.
- Aim for a payback period of <12 months to maintain healthy cash flow.
Core Concepts
LTV (Lifetime Value)
The total gross profit attributed to the entire future relationship with a customer. Formula: (ARPU * Margin) / Churn.
CAC (Customer Acquisition Cost)
The total cost of sales and marketing aimed at acquiring a new customer. Total Spend / New Customers.
LTV:CAC Ratio
The golden metric of unit economics. 3:1 is healthy. >5:1 means you are growing too slowly. <1:1 means you are losing money.
What is Customer Lifetime Value (LTV) Calculator?
This tool uses the standard infinite geometric series formula for LTV: (ARPU * Margin) / Churn. It assumes a constant churn rate and constant ARPU over the customer's life.
Best For
- • Raising venture capital (investors demand this metric).
- • Setting marketing budgets (CAC caps).
- • Evaluating the impact of a price increase or churn reduction initiative.
Limitations
- • Assumes constant variables (reality is lumpy).
- • Does not discount future cash flows (NPV).
- • Sensitive to small changes in Churn rate inputs.
Alternative Methods
Cohort Analysis
Tracking specific groups of users over time to see actual retention curves.
Payback Period
Focusing solely on time-to-breakeven for cash flow management.
Industry Applications
See how this methodology generates real revenue uplift in different sectors.
Subscription Box
High churn (10%) was killing LTV despite low CAC.
Invested in better onboarding and 'surprise gifts' in month 3.
Enterprise SaaS
Long payback period (18 months) caused cash crunch.
Shifted from monthly billing to annual upfront billing with a 20% discount.