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SaaS Churn & Customer Lifetime Value (LTV) Calculator

Performance Metrics

Customer Churn Rate:

Revenue Churn Rate:

Customer Lifetime (Months):

Customer Lifetime Value (LTV):

function calculateSaaSMetrics() { var mrrStart = parseFloat(document.getElementById('mrrStart').value); var mrrLost = parseFloat(document.getElementById('mrrLost').value); var custStart = parseFloat(document.getElementById('custStart').value); var custLost = parseFloat(document.getElementById('custLost').value); var arpu = parseFloat(document.getElementById('arpu').value); var margin = parseFloat(document.getElementById('margin').value) / 100; if (isNaN(mrrStart) || isNaN(mrrLost) || isNaN(custStart) || isNaN(custLost) || isNaN(arpu)) { alert("Please fill in all fields with valid numbers."); return; } var custChurnRate = (custLost / custStart) * 100; var revChurnRate = (mrrLost / mrrStart) * 100; var lifetime = 1 / (custChurnRate / 100); var ltv = (arpu * margin) / (custChurnRate / 100); document.getElementById('resCustChurn').innerText = custChurnRate.toFixed(2) + "%"; document.getElementById('resRevChurn').innerText = revChurnRate.toFixed(2) + "%"; document.getElementById('resLife').innerText = lifetime.toFixed(1) + " Months"; document.getElementById('resLTV').innerText = "$" + ltv.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById('results-area').style.display = 'block'; }

Understanding SaaS Churn and Lifetime Value (LTV)

In the world of Software as a Service (SaaS), two metrics reign supreme: Churn Rate and Customer Lifetime Value (LTV). These figures provide the ultimate pulse check for your subscription business health, telling you not just how much money you are making today, but how sustainable your growth is for the long term.

What is Customer Churn Rate?

Customer churn rate is the percentage of your customers who cancel their subscriptions during a given time period. High churn is the "silent killer" of SaaS companies; even with high acquisition rates, a leaky bucket makes it impossible to scale profitably.

  • The Formula: (Number of Lost Customers / Total Customers at the Start of the Period) x 100

Revenue Churn vs. Customer Churn

It is crucial to distinguish between the two. Customer Churn tracks people, while Revenue Churn (specifically Gross MRR Churn) tracks the actual dollars lost. If you lose one "Enterprise" customer paying $1,000/month, it impacts your bottom line significantly more than losing ten "Basic" customers paying $10/month.

Calculating Customer Lifetime Value (LTV)

LTV represents the total net profit your business expects to earn from a single customer over the duration of their relationship with your company. To calculate a realistic LTV, you must include your Gross Margin. If it costs you $20/month in server and support costs to maintain a $100/month customer, your margin is 80%.

LTV Formula: (Average Revenue Per User × Gross Margin %) / Customer Churn Rate

Example Calculation

Imagine your SaaS business has the following metrics for January:

  • Starting Customers: 500
  • Customers Lost: 10 (2% Churn Rate)
  • Average Revenue Per User (ARPU): $100
  • Gross Margin: 85%

In this scenario, your Customer Lifetime is 50 months (1 / 0.02). Your LTV would be ($100 * 0.85) / 0.02 = $4,250. This means you can afford to spend up to $4,250 to acquire a customer (CAC), though a healthy SaaS ratio usually aims for an LTV that is at least 3x the Cost of Acquisition (CAC).

How to Improve Your SaaS Metrics

  1. Improve Onboarding: Most churn happens in the first 30 days. Ensure users see value immediately.
  2. Target the Right Audience: "Bad fit" customers churn quickly. Refine your marketing to attract users who actually need your solution.
  3. Implement Expansion Revenue: Upsell existing customers to higher tiers or add-ons to achieve "Negative Net Churn."
  4. Gather Exit Data: Always ask why a customer is leaving. Use that data to patch features or improve UX.

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