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LTV calculator

Estimate what a customer is worth over their lifetime, and whether you spend the right amount to win one.

Average revenue per customer per month.
Revenue left after hosting, payment fees and support. Use 100% for lifetime revenue.
Share of customers who cancel each month.
What it costs to win one customer.

Result

Customer lifetime value (LTV)
$980.00 Gross profit from an average customer over their lifetime.
Average customer lifetime
25 months
LTV:CAC ratio
3.3:1 At or above the common 3:1 rule of thumb.
CAC payback
7.7 months Months of gross profit to earn back CAC.

How to use the LTV calculator

  1. 01

    Enter your average revenue per customer per month (ARPU).

  2. 02

    Enter your gross margin and your monthly customer churn rate.

  3. 03

    Add what it costs to win a customer (CAC) to see the LTV:CAC ratio and payback period.

How it’s calculated

Customer lifetime

Lifetime (months) = 1 ÷ monthly churn

At 5% monthly churn, an average customer stays 20 months.

Lifetime value

LTV = ARPU × gross margin ÷ monthly churn

The gross profit an average customer brings over their lifetime. Without a margin, use 100% to get lifetime revenue instead.

LTV:CAC and payback

LTV:CAC = LTV ÷ CAC Payback (months) = CAC ÷ (ARPU × gross margin)

How many times over a customer repays the cost of winning them, and how many months of gross profit that takes.

Frequently asked questions

What is a good LTV:CAC ratio?

A common rule of thumb is 3:1: a customer brings in three times what they cost to acquire. Under 1:1 you lose money on each customer. Well above 5:1 can mean you could spend more on growth.

Should LTV use revenue or gross margin?

Gross margin gives a truer picture, because it leaves out what it costs to serve the customer (hosting, payment fees, support). Comparing a margin-based LTV with CAC tells you whether acquisition pays for itself.

Why does a small change in churn move LTV so much?

Lifetime is 1 ÷ churn, so halving churn from 4% to 2% doubles the average lifetime from 25 to 50 months, and LTV doubles with it.

How do I work out CAC?

Add up what you spent to win customers in a period (ads, sponsorships, sales and marketing costs) and divide by the new customers from that period. Seeing which sources bring paying customers helps you spend where CAC is lowest.

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