LTV Calculator
Find out what an average customer is actually worth over their lifetime — from ARPU, gross margin, and churn, with no CAC required.
Your customer economics
Customer Lifetime Value
$2,667
= (ARPU × Gross Margin) ÷ Churn Rate
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Last updated: August 5, 2026 · Reviewed by the DoCalc team
What Is LTV?
Customer Lifetime Value is the total gross profit a business expects to earn from an average customer over the entire time that customer remains subscribed. It's a forward-looking estimate, not a historical fact — built from three inputs that are each measurable today: how much a customer pays, how much of that is actually profit, and how long they're likely to stick around.
LTV matters because it's the "worth" side of every acquisition decision. Spending money to acquire a customer only makes sense if that customer is worth meaningfully more than it cost to win them — which is why LTV is almost always discussed alongside CAC, even though, as this calculator shows, it can be computed entirely on its own.
The Formula
Where ARPU is average revenue per customer per month, Gross Margin is the percentage of that revenue retained after the direct cost of serving the customer, and Churn Rate is the monthly percentage of customers who cancel. The margin adjustment turns a revenue figure into a profit figure; dividing by churn converts a monthly profit figure into a lifetime one, using average customer lifespan (1 ÷ churn rate) as the multiplier.
How LTV Works
The churn-rate denominator is doing more work in this formula than it might first appear. Because average lifespan is the reciprocal of churn rate, LTV is extremely sensitive to small changes in churn — cutting monthly churn from 4% to 2% doesn't just improve retention modestly, it doubles both average customer lifespan and LTV, since 1/0.02 is twice 1/0.04. This is why churn reduction is often the highest-leverage lever available for improving unit economics, more so than raising prices or cutting cost to serve.
Gross margin matters for a related reason: a business with high revenue but low margin (heavy infrastructure or support costs per customer) can have a much lower LTV than a business with lower revenue but a leaner cost structure — which is exactly why LTV uses profit, not raw revenue, as its basis.
Worked Example
A company with $100/month ARPU, 80% gross margin, and 3% monthly churn:
The average customer is worth roughly $2,667 in lifetime gross profit — a figure that's only genuinely useful once compared against how much it costs to acquire that same customer, via the CAC Calculator or the combined LTV:CAC Ratio calculator.
What Moves LTV Most
| Lever | Effect on LTV |
|---|---|
| Reducing churn by half | Roughly doubles LTV |
| Increasing ARPU by 20% | Increases LTV by ~20% |
| Improving gross margin by 10 points | Proportional increase in LTV |
Pros and Cons
Pros: a clean way to see what a customer is worth, independent of acquisition cost; highlights how disproportionately churn affects lifetime value compared to pricing or margin changes.
Cons: assumes flat ARPU over the customer's lifetime, ignoring expansion revenue; produces a blended average that can obscure real differences between customer segments.
Who Should — and Shouldn't — Use This Calculator
Use it if you want to know what a customer is worth on its own, without needing a CAC figure — useful for pricing decisions, retention prioritization, or understanding your unit economics in isolation.
Skip or adjust for it if you specifically need to compare LTV against CAC — the LTV:CAC Ratio calculator does both in one place.
Common Mistakes to Avoid
The most common mistake is using revenue instead of gross-margin-adjusted profit, which significantly overstates LTV for any business with real cost of service. A second mistake is using annual churn in a formula built for monthly inputs — mixing time periods produces a nonsensical result. A third is treating LTV as fixed and permanent rather than a snapshot that shifts as churn, pricing, or margin change — it should be recalculated regularly, not set once and forgotten.
Expert Recommendation
If you only have time to improve one input to this formula, focus on churn rather than ARPU or margin — because of the reciprocal relationship between churn and lifespan, retention improvements compound into LTV gains faster than comparable percentage improvements to pricing or cost structure.
Frequently Asked Questions
What is LTV?
Customer Lifetime Value is the total gross profit a business expects to earn from an average customer over the entire time they remain subscribed.
Why does LTV use gross margin, not just revenue?
Because LTV is meant to measure profit, not just revenue — using raw ARPU without accounting for cost of service would overstate what a customer is actually worth to the business.
How is average customer lifespan calculated?
As 1 divided by the monthly churn rate. A 3% monthly churn rate implies an average customer lifespan of about 33 months (1 / 0.03).
What's the difference between this and the LTV:CAC ratio calculator?
This calculator computes LTV on its own, with no CAC input required. The LTV:CAC ratio calculator takes both LTV and CAC and compares them as a ratio.
What if my churn rate is 0%?
Mathematically, LTV becomes infinite, since a customer who never churns generates gross profit indefinitely. In practice, use a realistic non-zero churn estimate, or interpret an infinite result as "not yet meaningful" rather than a literal number.
Should I use monthly or annual churn in this formula?
Monthly, to match the monthly ARPU input — this calculator's formula assumes both figures are on the same monthly basis.
Is LTV the same for every customer?
No — this calculator produces an average, blended LTV. Different customer segments (by plan tier, acquisition channel, or company size) often have meaningfully different LTVs, and segmenting the calculation gives a more accurate picture.
Does LTV account for expansion revenue?
Not in this simple formula — it assumes a flat ARPU for the customer's lifetime. A more advanced LTV model would factor in expected expansion revenue growing ARPU over time.
What's a good LTV?
LTV alone isn't meaningful without context — it only becomes actionable when compared against CAC. A healthy SaaS business typically targets LTV at least 3x its CAC.
How can I increase LTV?
Three levers: increase ARPU (pricing, upsells), improve gross margin (reduce cost to serve), or reduce churn (better retention) — reducing churn usually has the largest compounding effect since it directly extends customer lifespan.
Conclusion
LTV distills three separate business realities — pricing, cost structure, and retention — into one number representing what a customer is actually worth. Because churn drives it disproportionately, it's often the fastest lever to move, and the one worth checking first.