SaaS LTV Calculator
Calculate Software-as-a-Service (SaaS) customer lifetime value using ARPU, churn rate, and gross margin. Free online LTV calculator with charts and breakdowns.
About This Calculator
The SaaS LTV (Customer Lifetime Value) Calculator helps subscription-based businesses estimate the total net profit they can expect from a single customer over the entire relationship. This essential SaaS metric guides pricing strategy, customer acquisition spending, and retention investments for B2B and B2C companies worldwide.
The calculator uses the industry-standard LTV formula: LTV = ARPU × Gross Margin ÷ Monthly Churn Rate. ARPU (Average Revenue Per User) represents monthly subscription revenue per account, gross margin accounts for service delivery costs, and churn rate determines average customer lifespan. When account expansion is included, the calculator uses the advanced formula: LTV = 0.5 × (1/churn) × (2×ARPU + Expansion × (1/churn − 1)) × Gross Margin to account for growing ARPU over time.
Key insights from the calculator include Customer LTV, average customer lifetime in months, total revenue per customer, monthly gross profit, and the critical LTV:CAC ratio. A healthy SaaS business typically targets an LTV:CAC ratio of 3:1 or higher, ensuring customer acquisition costs are recovered multiple times over the customer relationship.
Regional Notes
United States: US SaaS companies typically report ARPU in USD and often use monthly churn rates of 3-7% for SMB and 1-3% for enterprise. Gross margins for mature SaaS companies average 70-85%. The 3:1 LTV:CAC benchmark originates from US venture capital analysis.
United Kingdom: UK SaaS businesses follow similar patterns with GBP-denominated ARPU. UK enterprise SaaS tends to have lower churn (1-2% monthly) due to longer contract terms. Gross margins align with US averages of 70-85%.
India: Indian SaaS companies often have lower ARPU in INR but benefit from lower operational costs. Monthly churn rates vary from 3-8% depending on the segment. The growing Indian SaaS ecosystem has seen LTV:CAC ratios improve as the market matures.
Frequently Asked Questions
What is SaaS LTV?
SaaS LTV (Customer Lifetime Value) is the total net profit a business expects to earn from a single customer account over the entire duration of their relationship. It measures how much revenue a customer generates from subscription payments minus costs before they churn.
How do you calculate SaaS LTV?
The basic SaaS LTV formula is: LTV = ARPU × Gross Margin ÷ Monthly Churn Rate. For example, with ARPU of $50, gross margin of 80%, and monthly churn of 5%, LTV = 50 × 0.80 ÷ 0.05 = $800. With account expansion, a more complete formula accounts for growing ARPU over the customer lifetime.
What is a good LTV:CAC ratio?
A good LTV:CAC ratio is 3:1 or higher, meaning the customer generates three times more value than the cost to acquire them. A ratio below 1:1 means you are spending more to acquire customers than they will ever return. Top SaaS companies target 5:1 or greater.
What is the difference between LTV and ARPU?
ARPU (Average Revenue Per User) measures monthly revenue per customer. LTV measures total profit over the entire customer relationship. ARPU is a snapshot of current monthly performance, while LTV projects long-term value by factoring in churn rate and gross margin.
How does churn rate affect SaaS LTV?
Churn rate has an inverse relationship with LTV — lower churn means longer customer relationships and higher LTV. Reducing monthly churn from 5% to 2% increases average customer lifetime from 20 months to 50 months, more than doubling LTV even with the same ARPU and margin.
What is account expansion in SaaS LTV?
Account expansion refers to additional revenue from existing customers through upsells, cross-sells, or plan upgrades. In LTV calculations, account expansion increases ARPU over time, which means customers become more valuable the longer they stay. Even small monthly expansion can significantly boost LTV.
Is SaaS LTV calculation different for B2B vs B2C?
Yes. B2B SaaS typically has higher ARPU, lower churn (2-5% monthly), longer sales cycles, and higher CAC. B2C SaaS often has lower ARPU, higher churn (5-10% monthly), and lower CAC. The LTV formula remains the same, but benchmarks and target LTV:CAC ratios differ significantly.
How often should SaaS companies track LTV?
SaaS companies should track LTV monthly or quarterly. Monthly tracking helps identify churn trends early, while quarterly reviews allow for deeper cohort analysis. LTV should be tracked alongside CAC, churn rate, and MRR for a complete view of business health.