Unit Economics
LTV Calculator
Customer Lifetime Value (LTV) is the total profit you expect to make from a single customer. It is the ceiling for your customer acquisition cost (CAC).
Inputs
$
%
%
Typically 70-90% for SaaS (Revenue minus COGS/Hosting/Support).
Customer Lifetime Value (LTV)
$0
Based on a 0 month average lifespan
Avg Lifespan
0 Months
Lifetime Gross Profit
$0
LTV:CAC Ratio Rule
A healthy SaaS business should tend towards an LTV:CAC ratio of 3:1 or higher.
Meaning: If your LTV is $0, you should spend no more than $0 to acquire a customer.
How to Calculate LTV
The simplified formula for LTV in SaaS is:
LTV = (ARPA × Gross Margin %) / Churn Rate
Where:
- ARPA: Average Revenue Per Account (monthly).
- Gross Margin: The percentage of revenue you keep after direct costs (hosting, support). Usually ~80% for SaaS.
- Churn Rate: The percentage of customers who cancel each month.
Why Churn Kills LTV
Look at the math. Churn rate is the denominator. Because it divides the numerator, small changes in churn have massive exponential effects on LTV.
Halving your churn rate (e.g., from 5% to 2.5%) doubles your LTV. This is why retention is often a better lever for growth than acquisition.