LTV Calculator
Estimate customer lifetime value from ARPU, margin, and churn.
This LTV (Customer Lifetime Value) calculator, or lifetime value calculator, estimates the total gross-margin profit a business can expect from a customer over their entire relationship, using average revenue per user, gross margin, and churn rate.
Enter your ARPU, gross margin percentage, and churn rate, and the calculator returns your estimated LTV.
Worked Calculation Examples
| Scenario | Result | Calculation Step |
|---|---|---|
| $100 ARPU, 70% gross margin, 5% monthly churn | LTV = $1,400 | LTV = (100 × 0.70) ÷ 0.05 = 70 ÷ 0.05 = $1,400. |
| $50 ARPU, 80% gross margin, 2% monthly churn | LTV = $2,000 | LTV = (50 × 0.80) ÷ 0.02 = 40 ÷ 0.02 = $2,000 - a lower ARPU here still produces a higher LTV than the first example, thanks to much lower churn. |
The LTV Formula
LTV = (ARPU x gross margin) / churn rate. A customer paying $100/month (ARPU) at 70% gross margin with a 5% monthly churn rate has an LTV of ($100 x 0.70) / 0.05 = $1,400 - the churn rate essentially estimates the average customer lifespan (1/churn rate = expected months retained).
Why LTV Depends Heavily on Churn Rate
Because churn rate sits in the denominator, even small changes in churn produce large swings in LTV - cutting monthly churn from 5% to 2.5% doubles the estimated customer lifespan and therefore doubles LTV, which is why reducing churn is often one of the highest-leverage improvements a subscription business can make.
How to Use the LTV Calculator
- Open the LTV Calculator and enter the values requested in the input fields.
- Check the units, percentages, dates, or time periods before reading the answer.
- Review the instant result and adjust any value to compare another scenario.
- Use the formula, example, and FAQs below to understand how the ltv calculator works.
Frequently Asked Questions
How do you calculate customer lifetime value?
Multiply average revenue per user (ARPU) by gross margin percentage, then divide by churn rate: LTV = (ARPU x gross margin) / churn rate.
Why does churn rate have such a big effect on LTV?
Churn rate estimates average customer lifespan (1/churn rate), and since LTV scales directly with that lifespan, even small reductions in churn can substantially increase estimated lifetime value.
What is a good LTV to CAC ratio?
A commonly cited healthy benchmark is an LTV:CAC ratio of at least 3:1, meaning a customer's estimated lifetime value should be at least three times the cost of acquiring them.
How do I use this ltv calculator?
Enter the known values, review the units or settings, and the calculator updates the result instantly. The formula and example on this page show how the answer is produced.
What does the LTV Calculator calculate?
Estimate customer lifetime value from ARPU, margin, and churn. It is designed for fast browser-based calculations without sign-up, downloads, or manual spreadsheet setup.
What formula does this ltv use?
The formula is: LTV = ARPU * gross margin / churn rate. Customer lifetime value modeling adapts actuarial techniques long used in insurance to estimate the total value of a policy over a customer's expected relationship duration - in SaaS specifically, the LTV:CAC ratio benchmark (commonly cited as a healthy target of 3:1 or better) was popularized by venture capital investors evaluating subscription business unit economics starting in the 2000s and 2010s.
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Last updated: September 27, 2026.