SaaS LTV & Churn Rate Calculator
Analyze your unit economics to optimize customer acquisition and growth.
Understanding SaaS Unit Economics
For any subscription-based business, two metrics reign supreme: Churn Rate and Customer Lifetime Value (LTV). These metrics tell you if your business model is sustainable or if you are pouring money into a "leaky bucket."
The Mathematics of Churn
Churn is the percentage of customers who cancel their subscription over a specific period. In this calculator, we use the monthly formula:
Churn Rate = (Lost Customers / Starting Customers) × 100
A "good" churn rate varies by industry. For B2B enterprise SaaS, 1-2% monthly churn is standard. For B2C apps, churn can often be as high as 5-10%.
Calculating Lifetime Value (LTV)
LTV represents the total gross profit you expect to earn from a customer throughout their entire relationship with your company. The formula used here is:
LTV = (ARPU × Gross Margin %) / Churn Rate
Where ARPU is Average Revenue Per User. Factoring in Gross Margin is critical because it accounts for the cost of servicing that customer (server costs, support, etc.), providing a more accurate picture of capital available for marketing.
Realistic Example
Suppose your SaaS company starts the month with 500 customers. During the month, you lose 10 customers. Your average subscription is $100/month with an 85% gross margin.
- Churn Rate: (10 / 500) = 2.0%
- Customer Lifetime: 1 / 0.02 = 50 months
- LTV: ($100 × 0.85) / 0.02 = $4,250
This means you can theoretically spend up to $4,250 to acquire a customer (CAC), though a healthy LTV:CAC ratio is typically 3:1 or higher.