Calculate SaaS customer lifetime value from monthly ARPU, gross margin, and churn, then review average lifetime, monthly gross profit per customer.
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SaaS lifetime value worksheet Calculate customer lifetime value from monthly ARPU, gross margin, and monthly churn, then read the result as gross profit per customer over the expected customer lifetime.
How the formula works
This page uses a gross-margin-adjusted lifetime value model. It turns ARPU into monthly gross profit per customer, divides that amount by monthly churn to estimate average lifetime, then combines the two into a planning number you can use for CAC, retention, and payback review.
Monthly gross profit per customer
ARPU x gross margin
This is the gross profit generated each month before churn is applied.
Average lifetime
1 / monthly churn
Lower churn stretches the average customer lifetime dramatically.
LTV output
Monthly gross profit x lifetime
The result is a gross-margin-adjusted lifetime value estimate.
Display currency
Switch the display currency for the LTV and ARPU outputs without changing the underlying SaaS metrics.
Enter your SaaS assumptions Add monthly ARPU, gross margin, and monthly churn to estimate customer lifetime value and see how churn changes the result.
SaaS lifetime value calculator guide: ARPU, gross margin, churn, and LTV:CAC context
A SaaS lifetime value calculator is only useful if it keeps churn and gross margin visible. This page estimates gross-margin-adjusted customer lifetime value from monthly ARPU, gross margin, and monthly churn, then explains how to read the result as a planning number for CAC, retention, and payback review.
What this SaaS lifetime value calculator measures
SaaS lifetime value, often shortened to SaaS LTV or customer lifetime value, estimates the amount of gross profit a typical customer should generate over the full relationship. The key difference from a simple revenue multiple is that the calculator applies gross margin before it projects lifetime value, so the result reflects profit rather than topline revenue.
That distinction matters because a high-revenue account can still be a poor economic outcome if support, hosting, onboarding, or service costs are too high. By keeping gross margin inside the formula, the calculator gives a cleaner view of what the customer is actually worth before acquisition cost is considered.
How the formula works
The worksheet starts with monthly ARPU, converts that into monthly gross profit per customer by multiplying by gross margin, and then divides by monthly churn to estimate average lifetime. The lower the churn, the longer the expected customer life and the larger the resulting lifetime value.
That is why SaaS lifetime value is often presented as a planning equation rather than a final proof of business health. It captures the relationship between revenue per account, margin, and retention, but it does not model upsells, expansion revenue, discounting, or segment-by-segment cohort behavior.
Monthly gross profit per customer = ARPU x Gross margin
Turns topline revenue into margin-adjusted monthly profit per customer.
Average lifetime (months) = 1 / Monthly churn rate
Converts churn into an average expected customer lifetime.
SaaS lifetime value = Monthly gross profit per customer x Average lifetime
Combines margin-adjusted monthly profit with expected lifetime.
Why churn changes the answer so quickly
Churn sits in the denominator, which means small changes in churn can have a much bigger effect than similarly sized changes in ARPU or margin. If monthly churn falls, the expected lifetime extends immediately, and the same monthly gross profit gets multiplied across more months.
That sensitivity is the main reason retention work often produces a bigger lifetime-value gain than short-term pricing tweaks. A slight improvement in churn can increase LTV without changing acquisition spend, which is why SaaS teams usually keep retention, CAC, and lifetime value in the same unit-economics conversation.
Worked example: 100 ARPU, 80% gross margin, 3% churn
Suppose monthly ARPU is 100, gross margin is 80%, and monthly churn is 3%. Monthly gross profit per customer is 80. Average lifetime is 33.3 months, because 1 divided by 0.03 equals 33.3. Multiply those values together and the estimated lifetime value is 2,666.67.
That same example also shows why the output should be read as a planning estimate, not a guarantee. If churn moved from 3% to 2%, average lifetime would rise to 50 months and the same 80 of monthly gross profit would imply a much higher LTV. The core lesson is that retention assumptions deserve as much attention as revenue assumptions.
How to use LTV with CAC and retention
Most SaaS teams use lifetime value alongside customer acquisition cost, not in isolation. A common benchmark is a 3:1 LTV:CAC ratio, meaning lifetime value should be at least three times acquisition cost. That benchmark is not universal, but it is a useful planning shorthand when you are reviewing spend efficiency.
LTV also connects naturally to retention analysis. A retention calculator or churn calculator can show why a cohort is weakening, while the LTV worksheet translates that retention pattern into gross-profit terms. Used together, those pages give you the math behind both customer loss and the economic value of keeping customers longer.
SaaS Valuation — LTV Calculator — Calculator reference that shows the same ARPU, churn, and gross-margin structure used on this page.
Where this calculator is limited
This worksheet does not include expansion revenue, negative churn, cohort-specific retention curves, discounting, or direct CAC inputs. It uses one average monthly churn figure, which is useful for quick planning but not a substitute for a fuller subscription-finance model.
It also assumes the inputs all refer to the same measurement window. If one figure is monthly and another is annual, or if ARPU is mixed with ARPA from a different customer definition, the result will no longer be comparable.
For that reason, this page is best used as a quick operating model: it shows how much gross profit a customer may generate on average, how long they may stay, and how retention changes move the answer.
Frequently asked questions
What is SaaS lifetime value?
SaaS lifetime value is the expected gross profit a typical customer generates over the full relationship. It is often called customer lifetime value or LTV, and it is usually calculated from ARPU, gross margin, and churn.
Why does this calculator use gross margin instead of revenue alone?
Because lifetime value is more useful when it reflects profit, not just topline revenue. Gross margin removes direct delivery costs and gives a better picture of what each customer is actually worth.
Why does churn have such a big effect on SaaS LTV?
Churn is in the denominator of the formula. Lower churn extends the average customer lifetime, which means the same monthly gross profit gets multiplied across more months.
Is SaaS LTV the same as customer lifetime value?
In practice, yes. SaaS teams often use customer lifetime value and SaaS LTV to mean the same thing, provided the calculation is based on subscription revenue, gross margin, and churn.
Should I use ARPU or ARPA in the formula?
Either term can work if you stay consistent. ARPU means average revenue per user, while ARPA means average revenue per account. The key is to use the same customer definition throughout the calculation.
What is a good LTV:CAC ratio for SaaS?
A common planning benchmark is 3:1, which means lifetime value should be at least three times customer acquisition cost. The exact target depends on growth stage, margins, payback goals, and how predictable retention is.
Does this calculator include expansion revenue or negative churn?
No. It uses one average churn rate and a simple gross-margin-adjusted formula. If you need a model that includes expansion, contraction, or cohort curves, use a more advanced subscription model.
Can I use annual churn instead of monthly churn?
Not directly. This worksheet is built around monthly churn. If your source data is annual, convert it to a monthly rate first so the denominator matches the rest of the formula.
When should I use a retention calculator instead?
Use a retention or churn calculator when you want to understand why customers are staying or leaving. Use this LTV calculator when you want to turn that retention pattern into gross-profit terms.
What does the result actually tell me?
It tells you the approximate gross profit a typical customer may produce over its expected lifetime under the assumptions entered. It is a planning estimate, not a guarantee.
