# Customer Lifetime Value (LTV) Calculator

> Customer lifetime value (LTV) is the gross profit you earn from a customer before they leave: monthly revenue per customer x gross margin / monthly churn. A $50/month customer at 80% margin and 4% monthly churn is worth $1,000. Compare it with what you spend to acquire one - 3:1 or better is healthy.

Source: https://rankcert.com/tools/ltv-calculator
Free, no signup. Updated: 2026-10-29

## How to use it

1. Enter average monthly revenue per customer (ARPA).
2. Enter gross margin and monthly churn rate.
3. Add customer acquisition cost to see LTV:CAC and how many months it takes to earn CAC back.

## LTV formulas

Use gross margin, not revenue - LTV on revenue overstates what a customer is worth.

| Metric | Formula | Worked example |
| --- | --- | --- |
| LTV | ARPA x gross margin / monthly churn | $50 x 0.8 / 0.04 = $1,000 |
| Average lifetime | 1 / monthly churn | 1 / 0.04 = 25 months |
| LTV : CAC | LTV / CAC | $1,000 / $300 = 3.3 : 1 |
| CAC payback | CAC / (ARPA x gross margin) | $300 / $40 = 7.5 months |

## Questions

### What is a good LTV to CAC ratio?

3:1 is the usual benchmark. Below 1:1 you lose money on every customer; well above 5:1 often means you are underinvesting in growth and could spend more to acquire customers.

### What is a good CAC payback period?

Under 12 months is healthy for most SaaS businesses, and under 6 is strong. Long payback periods tie up cash, which shortens runway even when LTV looks good.

### Why use gross margin in LTV?

Because revenue is not profit. Hosting, payment fees and support all scale with customers; LTV on gross profit tells you what a customer is actually worth to the business.

### How do I calculate LTV with no churn data?

Use a conservative estimate. Early SaaS products often see 3 to 8 percent monthly churn for small business customers. Re-run the numbers once you have three months of real data.

### Is LTV the same as CLV?

Yes. LTV, CLV and CLTV all mean customer lifetime value. The formula here is the standard SaaS version, built on monthly churn.

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

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

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