Amortization Calculator with Extra Principal

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SaaS Customer Lifetime Value (LTV) Calculator

– Months

Calculated Results

Total Lifetime Value

$0.00

Max Acquisition Cost (CAC)

$0.00

*Max CAC is based on a 3:1 LTV/CAC ratio target.

function calculateLTV() { var arpa = parseFloat(document.getElementById('arpa').value); var margin = parseFloat(document.getElementById('margin').value); var churn = parseFloat(document.getElementById('churn').value); if (isNaN(arpa) || isNaN(margin) || isNaN(churn) || churn <= 0) { alert("Please enter valid numbers. Churn rate must be greater than 0."); return; } // Logic: LTV = (ARPA * Gross Margin %) / Monthly Churn Rate % var marginDecimal = margin / 100; var churnDecimal = churn / 100; var ltv = (arpa * marginDecimal) / churnDecimal; var lifespan = 1 / churnDecimal; var targetCAC = ltv / 3; document.getElementById('ltv-result').innerText = '$' + ltv.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('cac-limit').innerText = '$' + targetCAC.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('lifespan-output').innerText = lifespan.toFixed(1) + " Months"; document.getElementById('result-container').style.display = 'block'; }

What is Customer Lifetime Value (LTV)?

Customer Lifetime Value (LTV or CLV) is one of the most critical metrics for any SaaS (Software as a Service) business. It represents the total amount of revenue a company can expect to earn from a single customer account throughout its entire business relationship.

Understanding your LTV helps you determine how much you can afford to spend on customer acquisition (CAC) while remaining profitable. A healthy SaaS company typically aims for an LTV that is at least three times its CAC (3:1 ratio).

The SaaS LTV Formula

This calculator uses the standard SaaS LTV formula, which accounts for your gross margin to provide a more accurate picture of "Value" (profit) rather than just "Revenue":

LTV = (ARPA × Gross Margin %) / Monthly Churn Rate %

Key Variables Explained

  • ARPA (Average Revenue Per Account): The average amount of money a customer pays you per month.
  • Gross Margin %: The percentage of revenue left after deducting the direct costs of providing the service (e.g., hosting, support, third-party APIs).
  • Monthly Churn Rate: The percentage of your customers that cancel their subscription each month.
  • Customer Lifespan: Calculated as 1 / Churn Rate. For example, a 5% churn rate implies a 20-month lifespan.

Practical Example

Let's say your SaaS product costs $100 per month. Your server and support costs are $20 per customer, making your Gross Margin 80%. If 5% of your customers churn every month, the calculation is:

  1. Lifespan = 1 / 0.05 = 20 Months
  2. Revenue per Lifespan = $100 × 20 = $2,000
  3. LTV (Profit) = $2,000 × 0.80 = $1,600

In this scenario, to maintain a healthy 3:1 ratio, you should spend no more than $533.33 to acquire a single customer (CAC).

How to Improve Your LTV

To increase your LTV, you have three primary levers:

  1. Increase ARPA: Upsell customers to higher tiers or add-on features.
  2. Reduce Churn: Focus on customer success, better onboarding, and product improvements to keep users longer.
  3. Optimize Margin: Lower your infrastructure costs or automate support to increase the profitability of every dollar earned.

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