ConversionMath

SaaS LTV Calculator

Calculate customer lifetime value for SaaS and subscription businesses using ARPU, churn, and optionally gross margin — with the option to toggle between basic and margin-adjusted LTV.

Your Customer Lifetime Value (LTV)

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Formula LTV = ARPU ÷ Monthly Churn Rate

How to use this calculator

Start with the "Basic LTV" mode if you just want a quick estimate based on revenue and churn. Switch to "Gross Margin LTV" for a more accurate number that accounts for the cost of servicing customers. Enter your average revenue per user (ARPU), your monthly churn rate, and — in the margin mode — your gross margin percentage. The calculator returns your estimated customer LTV.

What is SaaS LTV?

SaaS LTV (customer lifetime value) measures the total expected revenue — or gross profit — from a customer over their full lifetime with your subscription business. Unlike transactional LTV, which uses AOV and purchase frequency, SaaS LTV uses recurring revenue (ARPU) and churn rate, because subscription businesses earn revenue continuously until customers cancel. Most SaaS finance teams report both a basic LTV (ARPU ÷ churn) and a gross margin LTV that accounts for the cost of delivering the service. The margin-adjusted version is more accurate for business decisions — it tells you how much gross profit each customer actually produces.

When to use this calculator

  • SaaS companies and subscription businesses
  • Calculating LTV:CAC for subscription-based unit economics
  • Setting CAC targets and evaluating paid acquisition
  • Board reporting and investor communications
  • Making retention vs. acquisition investment decisions
  • Comparing cohorts, segments, or plans

Frequently asked questions

What is a good SaaS LTV?
LTV only makes sense relative to CAC. The industry standard benchmark is LTV ≥ 3× CAC, with a CAC payback period of less than 12–18 months. A $10,000 LTV is great if your CAC is $3,000 and concerning if your CAC is $8,000. Absolute LTV numbers vary enormously by segment: SMB SaaS LTVs are often $500–5,000; mid-market $5,000–50,000; enterprise well into six figures.

What's the difference between Basic LTV and Gross Margin LTV?
Basic LTV (ARPU ÷ churn) measures expected revenue. Gross Margin LTV (ARPU × gross margin ÷ churn) measures expected gross profit. Gross margin LTV is more accurate for business decisions because it accounts for the actual cost of servicing customers — hosting, support, payment processing, and the cost of goods or services delivered. Most serious SaaS finance teams use the margin-adjusted version.

Why divide by churn rate?
Because dividing by churn gives you the expected customer lifespan. If 5% of customers churn each month, the average customer stays for 1 ÷ 0.05 = 20 months. Multiplying monthly ARPU by 20 months gives lifetime revenue. The division-by-churn shortcut folds this calculation into one step.

What churn rate should I use — monthly or annual?
Use monthly churn if your ARPU is monthly (most common SaaS setup) — the formula returns LTV in the same units. If you use annual churn, your ARPU should be annual too. Don't mix. Most SaaS calculators default to monthly because that's how subscription businesses typically report churn.

How do I calculate my gross margin for SaaS?
Gross margin = (Revenue − Cost of Goods Sold) ÷ Revenue. For SaaS, COGS typically includes hosting/infrastructure, customer support costs, payment processing fees, and any third-party services required to deliver the product. Typical SaaS gross margins range from 70–90%, with industry-leading companies above 80%.

What if my churn rate is 0%?
If your churn is truly 0%, LTV is mathematically infinite — which isn't useful for planning. In practice, no business has 0% churn; use your best current estimate (even 0.5% monthly is realistic for very sticky products). If you're too early to have meaningful churn data, start with an industry assumption (often 3–5% monthly for SMB SaaS, 1–2% for mid-market, <1% for enterprise) and update as you gather data.

Should I use net or gross churn?
Standard SaaS LTV formulas use gross customer churn (percentage of customers who cancel). If your business has significant expansion revenue (customers upgrading plans), you can use net revenue churn — which can even be negative for best-in-class SaaS businesses — but be aware this gives you a more optimistic LTV that assumes expansion continues. Most conservative finance teams use gross churn.

When should I use SaaS LTV vs Simple LTV?
Use SaaS LTV for subscription and recurring-revenue businesses — software, memberships, streaming, subscription boxes. Use Simple LTV for transactional businesses with discrete repeat purchases — ecommerce, retail, consumer brands. The two models reflect fundamentally different revenue patterns.

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