Calculate LTV, margin-adjusted LTV, and LTV:CAC ratio
How it works
Customer Lifetime Value estimates the total gross profit one customer generates before churning. It sets the ceiling on what you can rationally spend to acquire that customer, which makes it the anchor for every acquisition decision.
LTV = ARPA × Gross margin / Churn rate Average lifetime = 1 / Churn rate
ARPAaverage revenue per account per periodGross marginshare of revenue left after hosting, support, and delivery costsChurn rateshare of customers lost per period, same period as ARPA
- Average lifetime: 1 / 0.03 = 33.3 months
- Monthly gross profit: 80 × 0.80 = 64
- LTV: 64 / 0.03
- Multiplying by gross margin is not optional. Revenue-based LTV overstates value by whatever your cost of service is, and for infrastructure-heavy products that can be half the number.
- The formula assumes a constant churn rate, but real churn falls as cohorts age. Early customers who stay become far more valuable than a flat rate predicts, so cohort-based LTV runs higher.
- At churn below about 1% per month the formula divides by a tiny number and produces implausible lifetimes. Cap the horizon at 36 or 60 months instead.
- Use net revenue retention if expansion revenue is meaningful. Accounts that grow can produce net negative churn, which the simple formula cannot express.
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Frequently Asked Questions
Yes. Ltv Calculator costs nothing, needs no account, and runs right in your browser. There is no paywall, no watermark on the results, and no limit on how many times you can run the numbers.
Ltv Calculator uses the standard formula for this kind of calculation, so the output is only as good as the figures you type in. Rates, fees, and rules in finance shift over time, and we review the underlying assumptions on a regular schedule; check the "Last reviewed" date above for the most recent pass. Spotted something off? There's a feedback button in the bottom-right corner.