Customer Lifetime Value (LTV) Calculator
Free LTV calculator: enter ARPU, gross margin, and monthly churn to get customer lifetime value - plus your LTV:CAC ratio when you add acquisition cost.
The share of revenue left after cost of goods/service.
Customers lost per month ÷ customers at the start of the month.
Optional - enables the LTV:CAC ratio. Enter 0 to skip.
Results
Customer lifetime value
$4,800
- Average customer lifetime1 ÷ monthly churn.
- 40 months
- LTV : CAC ratioA ratio of 3:1 or better is commonly cited as healthy.
- 4
At $150 ARPU, 80% gross margin, and 2.5% monthly churn, each customer is worth $4,800 over an average 40-month lifetime. Against a $1,200 CAC that is an LTV:CAC of 4 - at or above the 3:1 threshold commonly cited as healthy.
Free and instant - nothing is stored or sent. Estimates for planning purposes, not accounting, tax, or investment advice.
Customer lifetime value answers the question that anchors every acquisition decision: how much gross profit does the average customer generate before they leave? Know it, and you know the ceiling of what you can rationally spend to acquire a customer.
This calculator uses the standard margin-adjusted formula - monthly revenue per customer times gross margin, divided by monthly churn - and, if you add your CAC, computes the LTV:CAC ratio investors ask about first.
The formula, in plain language
LTV = (ARPU × gross margin) ÷ monthly churn rate. The logic: 1 ÷ churn gives the average customer lifetime in months (2.5% monthly churn implies a 40-month average lifetime), and each of those months contributes ARPU × margin in gross profit.
With the defaults - $150 ARPU, 80% margin, 2.5% monthly churn - each customer contributes $120 of monthly gross profit for 40 months on average: an LTV of $4,800.
Why margin-adjusted LTV is the honest version
Revenue-based LTV (ARPU ÷ churn) counts dollars you never keep. Only gross profit can repay acquisition costs and fund the business, so serious operators and investors quote LTV on gross profit. If someone’s LTV looks suspiciously high, the margin adjustment is usually what is missing.
This simple model assumes flat ARPU and constant churn. Real cohorts often expand revenue over time (pushing true LTV up) or churn fastest in the early months (pulling it down) - cohort analysis refines the picture once you have the data.
Reading LTV against CAC
The ratio of LTV to CAC is the standard health check on unit economics. A ratio of at least 3:1 is commonly cited as healthy: enough spread to cover operating costs and still profit. Below 1:1, every new customer destroys value.
A very high ratio (say, above 5:1) is not automatically a win either - it is often read as underinvestment in growth. The defaults here produce a 4.0 ratio: $4,800 of LTV against $1,200 of CAC.
Frequently asked questions
How do I calculate customer lifetime value?
The standard simple formula is LTV = (monthly revenue per customer × gross margin %) ÷ monthly churn rate. For example: $150 ARPU × 80% margin ÷ 2.5% churn = $4,800. It assumes flat revenue and constant churn, so treat it as a baseline and refine with cohort data.
What is a good LTV to CAC ratio?
A ratio of 3:1 or better is commonly cited as healthy for subscription businesses. Below 1:1 means acquisition destroys value. Very high ratios can indicate underinvestment in growth - the business could profitably acquire more customers than it is.
Should LTV use revenue or gross profit?
Gross profit. Revenue-based LTV overstates value because COGS - hosting, support, delivery - never reaches the bottom line. The lower your gross margin, the more revenue-based LTV misleads. Investors will margin-adjust your number anyway, so start there.
What if my churn rate is zero or near zero?
The formula divides by churn, so zero churn produces an unbounded LTV - mathematically true, practically meaningless. With very low measured churn (common in young businesses with few customers), use a conservative assumed floor, such as 0.5–1% monthly, until real cohort data accumulates.
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