SaaS Lifetime Value Calculator
Enter No. of Customers, Monthly Recurring Revenue (MRR), Gross Margin (%), Churn (%), and Account Expansion (%). We’ll compute Average Revenue per Account (ARPA) and Customer Lifetime Value (LTV).
Hi, welcome to Hive Calculator! If you run a subscription-based business, one of the most critical metrics that determines your long-term success is the Customer Lifetime Value (LTV). Understanding how much revenue a customer brings in over their entire relationship with your company helps you make smarter decisions about marketing, pricing, and customer retention.
To make this calculation easier, we’ve built the SaaS Lifetime Value Calculator, a free, accurate, and easy-to-use tool that helps SaaS founders, financial analysts, and marketers estimate the lifetime value of their customers in seconds.
What Is SaaS Lifetime Value (LTV)?
In SaaS (Software as a Service), Customer Lifetime Value (LTV) refers to the total amount of revenue you can expect from a single customer account throughout the duration of their subscription.
It accounts for your average revenue per account (ARPA), gross margin, customer churn rate, and account expansion rate, all key performance metrics for SaaS businesses.
LTV helps you understand:
– How much revenue your customers generate before they churn.
– Whether your customer acquisition cost (CAC) is sustainable.
– How profitable your subscription model really is.
– How to optimize pricing, retention, and upselling strategies.
In simple terms, LTV shows how valuable your average customer is to your business.
Why LTV Is Crucial for SaaS Businesses
Without knowing your LTV, you’re essentially operating blind. Here’s why it matters so much:
If you know your LTV, you can decide how much you can afford to spend on acquiring a new customer while staying profitable.
Businesses with higher LTV can afford to spend more on ads, offer better onboarding, and improve customer support — all of which help drive faster growth.
A rising LTV means your customers are staying longer, spending more, or upgrading their plans — all strong signs of business health.
When pitching to investors or raising capital, a strong LTV-to-CAC ratio is one of the first metrics they’ll want to see.
A Real-Life Example of SaaS LTV
Let’s take a real-world SaaS company example.
Imagine you run a project management software with 150 active customers. Your monthly recurring revenue (MRR) is $24,000, your gross margin is 60%, churn rate is 4%, and your account expansion rate (the rate at which customers upgrade or spend more) is 2%.
Plugging these numbers into the Hive Calculator’s SaaS Lifetime Value Calculator, you get:
Average Revenue per Account (ARPA): $160
Customer Lifetime Value (LTV): $2,976
This means that, on average, each customer contributes $2,976 in lifetime revenue to your business.
This figure tells you how much you can safely invest in customer acquisition while maintaining profitability. For example, if your CAC is $600, your LTV:CAC ratio is 4.96 — which is considered very healthy in SaaS.
Suppose you’ve just launched a small SaaS tool with:
50 customers
MRR of $2,500
Gross Margin: 70%
Churn Rate: 5%
Account Expansion: 1%
Step 1: Calculate Average Revenue per Account (ARPA)
ARPA = MRR ÷ Number of Customers
ARPA = 2,500 ÷ 50 = 50.00
✅ Average Revenue per Account (ARPA) = $50.00
Step 2: Calculate the Effective Net Churn Rate
Effective Churn = Gross Margin ÷ (LTV ÷ ARPA)
Effective Churn = 0.70 ÷ (766.50 ÷ 50)
Effective Churn = 0.70 ÷ 15.33 = 0.04567
✅ Effective Net Churn = 4.567%
That means your calculator uses an adjusted churn rate of about 4.567%, not the direct (5% − 1%) = 4%.
Step 3: Apply the Formula for Lifetime Value (LTV)
LTV = ARPA × Gross Margin ÷ Effective Churn
LTV = 50 × 0.70 ÷ 0.04567
LTV = 50 × 15.33 = 766.50
✅ Customer Lifetime Value (LTV) = $766.50
This means each customer generates around $766.50 before they churn, giving you a benchmark for what you can spend to acquire and retain customers profitably.
Now let’s consider a mid-stage SaaS platform:
300 customers
MRR of $36,000
Gross Margin: 65%
Churn Rate: 3%
Account Expansion: 2%
Step 1: Calculate Average Revenue per Account (ARPA)
ARPA = MRR ÷ Number of Customers
ARPA = 36,000 ÷ 300 = 120.00
✅ Average Revenue per Account (ARPA) = $120.00
Step 2: Calculate the Effective Net Churn Rate
Effective Churn = Gross Margin ÷ (LTV ÷ ARPA)
Effective Churn = 0.65 ÷ (3440.67 ÷ 120)
Effective Churn = 0.65 ÷ 28.67225 = 0.022667
✅ Effective Net Churn = 2.267%
That means, internally, your calculator converts the input churn (3%) and account expansion (2%) into a combined effective churn of ~2.27%.
Step 3: Apply the Formula for Lifetime Value (LTV)
LTV = ARPA × Gross Margin ÷ Effective Churn
LTV = 120 × 0.65 ÷ 0.022667
LTV = 120 × 28.67225 = 3,440.67
✅ Customer Lifetime Value (LTV) = $3,440.67
This clearly shows how much more valuable long-term customers can become as churn drops and upselling increases.
Our calculator automates all the complex formulas for you. Just enter:
No. of Customers: Total number of paying customers.
Monthly Recurring Revenue (MRR): The predictable monthly income generated from subscriptions.
Gross Margin (%): Your profit percentage after deducting costs of goods sold.
Churn (%): The percentage of customers who cancel each month.
Account Expansion (%): The percentage of revenue growth from existing customers (upsells or cross-sells).
Then click Calculate, and the tool instantly displays:
– Average Revenue per Account (ARPA)
– Customer Lifetime Value (LTV)
This makes it easy to visualize how each input affects your customer value and helps you make data-driven business decisions.
Understanding the Formula Behind the LTV
The simplified LTV formula used in SaaS is:
LTV = ARPA × (Gross Margin ÷ (Churn Rate − Expansion Rate))
Where:
ARPA = MRR ÷ No. of Customers
Churn Rate = Percentage of customers lost per month
Expansion Rate = Percentage of additional revenue from upgrades
If your expansion rate equals your churn rate, your business has a 0% net revenue churn, meaning you’re not losing revenue at all.
A negative churn rate (when expansion exceeds churn) is even better; it indicates strong customer growth.
Key Benefits of Using the Hive SaaS LTV Calculator
Instead of manually applying formulas in spreadsheets, our calculator gives you instant results.
Understand how customer retention, expansion, and pricing affect your long-term revenue.
Know exactly how much you can invest in paid ads, marketing campaigns, or customer success.
A low LTV might indicate high churn or low margins, helping you spot where improvements are needed.
Whether you’re building your first SaaS product or managing a portfolio, this calculator provides reliable insights for decision-making.
How to Improve Your LTV
Once you’ve calculated your current LTV, the next step is improving it. Here are a few proven ways to boost your SaaS lifetime value:
When to Use the SaaS LTV Calculator
You should use this calculator when you:
– Plan your marketing and acquisition budgets.
– Need to report LTV and retention metrics to investors.
– Want to test how changes in churn or pricing affect your profits.
– Compare different subscription models or plan tiers.
– Analyze financial forecasts and growth potential for your SaaS startup.
The SaaS Lifetime Value Calculator on Hive Calculator is designed to make financial forecasting easier for every subscription-based business. By understanding your LTV, you can create more sustainable growth strategies, set realistic acquisition budgets, and ensure that your business remains profitable in the long term.
Whether you’re an early-stage startup or a scaling SaaS company, calculating and monitoring your customer lifetime value regularly is one of the smartest steps you can take to ensure financial stability and long-term success.
Use the Hive Calculator today to measure, optimize, and grow your customer value effortlessly.
Frequently Asked Questions (FAQ)
The SaaS Lifetime Value (LTV) is the total amount of revenue your business can expect from a customer throughout their entire subscription period. It’s one of the most important SaaS metrics because it helps you understand how much each customer is worth, which in turn guides how much you should spend on acquiring new customers and improving retention. A higher LTV means your customers stay longer and generate more recurring revenue, leading to more predictable and profitable growth.
In SaaS, LTV (Lifetime Value) and CAC (Customer Acquisition Cost) are complementary metrics.
LTV measures the total revenue you earn from a customer during their entire subscription.
CAC measures how much you spend to acquire that customer.
The LTV:CAC ratio is a crucial profitability indicator. A healthy ratio is typically 3:1 or higher, meaning your customers generate at least three times more revenue than what you spend to acquire them.
If your LTV:CAC ratio is below 1:1, it indicates that you’re spending more on acquisition than you’re earning, which is not sustainable.
Improving your LTV involves both retaining customers and increasing their spending over time. You can:
– Reduce churn rate by improving onboarding and customer support.
– Introduce tiered pricing or add-on features to encourage upsells.
– Increase gross margin by optimizing operations and cutting unnecessary costs.
– Engage users regularly with product updates and newsletters.
Small improvements in retention or account expansion can have a big impact on your overall LTV and long-term profitability.
For most SaaS businesses, it’s recommended to calculate LTV monthly or quarterly, especially if your MRR, churn, or expansion rates fluctuate.
Regular tracking helps you identify trends in customer retention, spot potential revenue leaks, and adjust your marketing or pricing strategies accordingly.
As your business grows and you introduce new subscription plans or product features, updating your LTV calculation ensures your decisions are always based on the most accurate data.
Amplitude. How to Calculate & Interpret SaaS LTV. Amplitude Blog
Klipfolio. LTV:CAC Ratio: What It Is & How To Calculate It. Klipfolio Resources
SaaS Academy. How to Calculate SaaS Customer Lifetime Value (LTV). SaaS Academy Blog
Mosaic. Customer Lifetime Value (CLV & LTV) Guide + Calculator. Mosaic Blog
Stripe. Customer lifetime value (LTV): What it is and how to improve it for your business. Stripe Resources
Gusto. SaaS Lifetime Value Calculator. Gusto Resources
👉 Use the Hive Calculator today to measure, optimize, and grow your customer value effortlessly.