In subscription businesses, customers pay every month until they cancel, so the expected lifetime is 1 ÷ churn. Expansion revenue (upsells and price rises) raises LTV sharply, which is why net revenue retention is watched so closely.
How to use the SaaS LTV Calculator
- I know
- ARPA (average revenue per account per month)
- Monthly recurring revenue (MRR)
- Number of customers
- Gross margin
- Monthly churn
- Account expansion per month
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the average revenue per account (or MRR and customers), gross margin, monthly churn and monthly expansion per account.
Inputs explained
| Field | What to enter |
|---|---|
| I know | Choose one: ARPA, MRR and number of customers |
| ARPA (average revenue per account per month) | Amount in your currency |
| Monthly recurring revenue (MRR) | Amount in your currency |
| Number of customers | A number |
| Gross margin | In % |
| Monthly churn | In % |
| Account expansion per month | Amount in your currency |
What each result means
- Average customer lifetime = 100÷[Monthly churn]
- Customer lifetime value (LTV) = [ARPA used]×[Gross margin]÷100÷([Monthly churn]÷100) + [Account expansion per month]×[Gross margin]÷100÷([Monthly churn]÷100)^2
- LTV without expansion = [ARPA used]×[Gross margin]÷100÷([Monthly churn]÷100)
Example values
How the main result changes when ARPA changes and everything else stays at the example values above:
| ARPA (average revenue per account per month) | Customer lifetime value (LTV) |
|---|---|
| 60 | 3,840 |
| 90 | 4,800 |
| 120 | 5,760 |
| 150 | 6,720 |
| 180 | 7,680 |
| 240 | 9,600 |
Formula
LTV = ARPA × gross margin ÷ churn
With expansion: LTV = ARPA × GM ÷ churn + expansion × GM ÷ churn²
ARPA = MRR ÷ customers
Worked example
Inputs: I know: ARPA; ARPA (average revenue per account per month): $120; Gross margin: 80 %; Monthly churn: 2.5 %; Account expansion per month: $1.5.
Results: ARPA used = $120.00; Average customer lifetime = 40 months; Customer lifetime value (LTV) = $5,760.00; LTV without expansion = $3,840.00.
Frequently asked questions
What is a good LTV for SaaS?
At least three times the customer acquisition cost.
Why does churn matter so much?
Halving churn doubles the expected lifetime and so roughly doubles LTV.
Should I use revenue or gross margin?
Gross margin, as it reflects the profit that pays back acquisition costs.