Free SaaS Tool
LTV Calculator
TL;DR
Customer lifetime value (LTV) estimates the gross-margin revenue an average customer generates before they churn. Margin-adjusted LTV = (ARPA × gross margin) ÷ monthly churn rate. Compare it to acquisition cost: an LTV:CAC ratio of 3:1 or higher is the standard healthy benchmark, with CAC payback ideally under 12 months.
Customer lifetime value (LTV)
$8,000
LTV : CAC ratio
6.7 : 1
Healthy — at or above the 3:1 benchmark.
How to calculate LTV
Margin-adjusted LTV = (ARPA × gross margin %) ÷ monthly churn rate, where ARPA is average revenue per account per month. Because average customer lifetime ≈ 1 ÷ monthly churn, lower churn raises LTV sharply.
LTV:CAC ratio = LTV ÷ customer acquisition cost. CAC payback = CAC ÷ (ARPA × gross margin).
Benchmarks
An LTV:CAC ratio of 3:1 or higher is the standard healthy target. CAC payback under 12 months is generally good for B2B SaaS; under 18 months is workable for enterprise. Always use gross margin rather than raw revenue so the figure stands up to scrutiny.
Why churn drives LTV
LTV is extremely sensitive to churn: cutting monthly churn from 4% to 2% roughly doubles the implied customer lifetime. That is why RetentionLens pairs revenue analytics with predictive churn scoring — small retention gains compound directly into higher lifetime value.
Frequently asked questions
How do you calculate customer lifetime value?
A common margin-adjusted formula is LTV = (ARPA × gross margin %) ÷ monthly churn rate. ARPA is average revenue per account per month. Dividing by churn reflects that lower churn means a longer expected lifetime, since average lifetime ≈ 1 ÷ monthly churn.
What is a good LTV:CAC ratio?
The widely used benchmark is 3:1 — each dollar of acquisition cost should return about three dollars of lifetime gross margin. Below 1:1 you lose money on every customer; far above 3:1 can signal you are underinvesting in growth.
Should LTV use revenue or gross margin?
Use gross margin, not raw revenue. Revenue-based LTV overstates value because it ignores the cost of serving the customer. Multiplying by gross margin gives a defensible figure for comparing against CAC.
What is CAC payback period?
CAC payback is how many months of gross-margin revenue it takes to recoup the cost of acquiring a customer: CAC ÷ (ARPA × gross margin). Under 12 months is generally healthy for B2B SaaS.
Stop calculating by hand
Connect Stripe and RetentionLens tracks this metric automatically — with cohorts, trends and churn-risk scoring. Start on the free tier.
Benchmarks are general SaaS ranges and vary by segment, stage and business model. Last reviewed 2026-05-30.