Customer Lifetime Value (LTV) estimates the value of a customer relationship. This calculator estimates lifetime gross profit before acquisition costs and overhead, assuming monthly revenue, margin, and customer churn stay constant. The formula is LTV = (ARPU x Gross Margin %) / Monthly Churn Rate. A good benchmark is an LTV:CAC ratio of 3:1 or higher. PM Toolkit's free LTV calculator helps product managers estimate lifetime value from monthly ARPU, customer churn, and gross margin.
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Example
You calculate LTV ARPU $50/mo · churn 5%/mo · margin 80%
pmtk → LTV = $800
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Customer Lifetime Value (LTV) Calculator
Estimate lifetime gross profit per customer from monthly revenue, margin, and churn.
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Monthly revenue per active customer.
Share of customers who cancel each month.
Revenue remaining after direct costs (COGS).
Enter CAC to unlock LTV:CAC ratio and payback period.
Customer Lifetime Value
$—
Enter ARPU and churn rate, then click Calculate.
Why this matters
LTV estimates a customer's lifetime gross profit under constant revenue, margin, and churn assumptions. Pair it with CAC to assess acquisition spend, and compare the estimate with observed customer cohorts before making long-term projections.
LTV = (ARPU × GrossMargin%) ÷ ChurnRate%
Use monthly customer churn. Gross margin adjusts revenue LTV for direct costs; the result does not deduct acquisition costs or overhead.
Understanding Customer Lifetime Value (LTV) for SaaS Businesses
Customer Lifetime Value (LTV) estimates the value of a customer relationship. This calculator adjusts monthly revenue for gross margin, then divides by monthly customer churn to estimate lifetime gross profit before acquisition costs and overhead.
LTV Formula and Calculation
The standard LTV formula is: LTV = (ARPU × Gross Margin %) ÷ Monthly Churn Rate %
Where ARPU (Average Revenue Per User) is your monthly revenue per customer, gross margin accounts for direct costs, and churn rate is the percentage of customers who cancel each month.
LTV by Business Model
There's no published, segmented dollar benchmark for LTV. The ranges below are illustrative only, and actual LTV depends on ARPU, churn, gross margin, and customer segment.
- B2B SMB SaaS: $1,000 - $5,000 LTV (illustrative)
- B2B Mid-Market: $10,000 - $50,000 LTV (illustrative)
- B2B Enterprise: $50,000 - $500,000+ LTV (illustrative)
- B2C SaaS: $200 - $2,000 LTV (illustrative)
LTV:CAC Ratio Optimization
A healthy LTV:CAC ratio is 3:1 or higher, meaning your customer lifetime value should be at least three times your customer acquisition cost (David Skok, forEntrepreneurs). A ratio of 5:1 or above is strong, but it can also signal under-investment in growth.
What is Customer Lifetime Value (LTV)?
Customer Lifetime Value (LTV) estimates the value of a customer over their relationship with a business. This calculator estimates lifetime gross profit by multiplying monthly revenue per customer by gross margin and dividing by monthly customer churn. It assumes those inputs stay constant and excludes acquisition costs and overhead.
SaaS LTV Formula
LTV = (ARPU × Gross Margin %) / Monthly Churn Rate
Operating target
3:1 or higher is Bessemer’s cloud LTV:CAC operating target, not an observed industry average.
Bessemer: Scaling to $100 MillionRate this calculator:
LTV benchmarks by SaaS segment
| Segment | Benchmark |
|---|---|
| B2B SaaS (SMB <$10k ARR) | $1,000 - $5,000 |
| B2B SaaS (Mid-Market $10k-100k ARR) | $10,000 - $50,000 |
| B2B SaaS (Enterprise >$100k ARR) | $50,000 - $500,000+ |
| B2C SaaS (Consumer) | $200 - $2,000 |
| High-Performing SaaS Teams | Achieve 90%+ of projected LTV |
| Average SaaS Teams | Achieve 60-80% of projected LTV |
| Struggling SaaS Teams | Achieve <50% of projected LTV |
Common questions
How do you calculate Customer Lifetime Value?
LTV = (Monthly ARPU × Gross Margin %) ÷ Monthly Customer Churn %. For example, if monthly ARPU is $100, gross margin is 80%, and monthly churn is 5%, then LTV = ($100 × 80%) ÷ 5% = $1,600. This estimates lifetime gross profit before acquisition costs and overhead, assuming ARPU, margin, and churn stay constant.
What is a good LTV:CAC ratio for SaaS?
David Skok presents 3:1 as a rough SaaS LTV:CAC guideline, not a universal health threshold. Interpret it with gross margin, retention assumptions, payback period, customer segment, and cash requirements. Enter CAC alongside ARPU, monthly churn, and gross margin to calculate the ratio and payback period.
Should I use gross margin in my LTV calculation?
Use gross margin when comparing LTV with acquisition costs. Multiplying monthly ARPU by gross margin accounts for direct delivery costs before dividing by monthly churn. For example, at an 80% gross margin, margin-adjusted LTV is 80% of revenue LTV. Acquisition costs and overhead are not deducted from this estimate.
How can I improve my customer lifetime value?
To improve LTV, look at why customers leave and whether better onboarding or product changes would help them stay. You can also raise ARPU through upsells, more features, or pricing changes. Annual contracts and a focus on higher-value customer segments are other options to consider.
When is my LTV calculation reliable?
This model is most useful when monthly ARPU, gross margin, and customer churn are reasonably stable. Small samples, changing retention, or seasonal purchasing make lifetime projections less reliable. Compare estimates with observed cohort revenue and test alternative assumptions with the what-if controls. The calculator does not automatically adjust for cohort age, seasonality, or expansion revenue.