How to Calculate Certificate of Deposit Interest

Churn Rate

0%

Customer LTV

$0

Avg. Lifetime

0 Mos

Understanding SaaS Retention and Lifetime Value

Customer Churn is the single most critical metric for any subscription-based business. It measures the rate at which customers cancel their subscriptions. A high churn rate acts like a "leaky bucket," where you must constantly acquire new users just to maintain your current revenue levels.

The Importance of LTV (Lifetime Value)

Customer Lifetime Value (LTV) predicts the total net profit you will earn from a customer over the duration of their relationship with your brand. To have a sustainable SaaS business, your LTV should generally be at least 3 times higher than your Customer Acquisition Cost (CAC).

The Formulas Used

• Churn Rate: (Start Customers – (End Customers – New Customers)) / Start Customers
• Customer Lifetime: 1 / Churn Rate
• LTV: (ARPU × Gross Margin %) / Churn Rate

Realistic Example Calculation

Suppose you start the month with 1,000 customers. During the month, you acquire 100 new customers and end the month with 1,050 customers. Your ARPU is $100 and your gross margin is 80%.

In this scenario, you lost 50 existing customers. Your churn rate is 5%. Your customers stay for an average of 20 months. Your Customer LTV would be ($100 * 0.80) / 0.05 = $1,600.

function calculateSaaSMetrics() { var startCust = parseFloat(document.getElementById("startCust").value); var endCust = parseFloat(document.getElementById("endCust").value); var newCust = parseFloat(document.getElementById("newCust").value); var arpu = parseFloat(document.getElementById("arpu").value); var grossMargin = parseFloat(document.getElementById("grossMargin").value); if (isNaN(startCust) || isNaN(endCust) || isNaN(newCust) || isNaN(arpu) || isNaN(grossMargin) || startCust 0 ? (1 / churnRate) : 0; // 3. Calculate LTV // LTV = (ARPU * Margin) / Churn var ltv = churnRate > 0 ? (arpu * (grossMargin / 100)) / churnRate : 0; // Update Results UI document.getElementById("results-area").style.display = "block"; document.getElementById("churnResult").innerText = (churnRate * 100).toFixed(2) + "%"; document.getElementById("lifetimeResult").innerText = churnRate > 0 ? lifetime.toFixed(1) + " Mos" : "∞"; document.getElementById("ltvResult").innerText = "$" + ltv.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); // Color coding for churn rate var churnEl = document.getElementById("churnResult"); if (churnRate * 100 <= 3) { churnEl.style.color = "#38a169"; // Green (Healthy) } else if (churnRate * 100 <= 7) { churnEl.style.color = "#d69e2e"; // Yellow (Average) } else { churnEl.style.color = "#e53e3e"; // Red (High Risk) } }