SaaS Lifetime Value Calculator
Enter customers, MRR, gross margin, churn and account expansion to find average revenue per account (ARPA) and customer lifetime value (LTV).
Updated
SaaS Lifetime Value (LTV) Calculator
Our SaaS Lifetime Value Calculator estimates how much gross profit an average customer account brings in over its whole subscription. Enter your number of customers, monthly recurring revenue (MRR), gross margin, monthly churn and account expansion, and it shows the average revenue per account (ARPA) and the customer lifetime value (LTV). It is made for SaaS founders, financial analysts and marketers.
Quick answer
SaaS LTV is gross margin × customer lifetime × average ARPA. With 150 customers, 24,000 MRR, a 60% margin, 4% churn and 2% expansion: 0.60 × 25 × 198.40 = 2,976.
- ARPA: MRR ÷ number of customers.
- Customer lifetime: 1 ÷ monthly churn, so 4% churn is 25 months.
- Expansion: ARPA grows by this percentage of the starting ARPA each month.
- LTV to CAC: a ratio of 3 : 1 or more is the usual target.
What Is SaaS Lifetime Value?
In SaaS (software as a service), customer lifetime value (LTV) is the amount you can expect to earn from a single customer account over the whole of its subscription. It combines four measures: average revenue per account (ARPA), gross margin, churn and account expansion. LTV helps you understand:
- How much your customers generate before they churn.
- Whether your customer acquisition cost (CAC) is sustainable.
- How profitable your subscription model really is.
- Where to improve pricing, retention and upselling.
SaaS LTV Formula
Lifetime = 1 ÷ Churn
Growth = ARPA × Expansion
Average ARPA = ARPA
+ Growth × (Lifetime − 1) ÷ 2
LTV = Gross margin × Lifetime
× Average ARPA
- ARPA: average revenue per account per month.
- Lifetime: the average number of months a customer stays. Churn is used as a decimal, so 4% is 0.04.
- Growth: the amount ARPA rises each month through upgrades and add-ons.
- Average ARPA: the average monthly revenue over the lifetime, half way between the first and the last month.
With no expansion the formula reduces to the simple version used across SaaS:
÷ Churn
This calculator assumes every customer stays for the average lifetime and that ARPA rises in a straight line. Some published formulas assume customers leave gradually instead, and give a different figure when expansion is above 0.
How to Calculate SaaS LTV
A project management tool has 150 customers and 24,000 of MRR. Gross margin is 60%, monthly churn is 4% and account expansion is 2%:
Lifetime = 1 ÷ 0.04 = 25 months
Growth = 160 × 0.02 = 3.20
Average ARPA
= 160 + 3.20 × 24 ÷ 2 = 198.40
LTV = 0.60 × 25 × 198.40
= 2,976
- Find ARPA. Divide MRR by the number of customers: 160.
- Find the lifetime. Divide 1 by the churn rate: 25 months.
- Find the monthly growth. Multiply ARPA by the expansion rate: 3.20.
- Find the average ARPA. Add half of the growth over the remaining 24 months: 198.40.
- Multiply. Gross margin × lifetime × average ARPA = 2,976.
If the customer acquisition cost is 600, the LTV to CAC ratio is 2,976 ÷ 600 = 4.96, which is very healthy for SaaS.
SaaS LTV Examples
A small startup. 50 customers, MRR of 2,500, 70% gross margin, 5% churn and 1% expansion:
Lifetime = 1 ÷ 0.05 = 20 months
Growth = 50 × 0.01 = 0.50
Average ARPA
= 50 + 0.50 × 19 ÷ 2 = 54.75
LTV = 0.70 × 20 × 54.75
= 766.50
A growing platform. 300 customers, MRR of 36,000, 65% gross margin, 3% churn and 2% expansion:
Lifetime = 1 ÷ 0.03
≈ 33.33 months
Growth = 120 × 0.02 = 2.40
Average ARPA
≈ 120 + 2.40 × 32.33 ÷ 2 = 158.80
LTV ≈ 0.65 × 33.33 × 158.80
≈ 3,440.67
The second company earns far more per customer: lower churn keeps each account longer, and expansion raises what it pays over that time.
The Five Inputs
- No. of customers
- The total number of paying customer accounts.
- MRR
- Monthly recurring revenue: the predictable monthly income from subscriptions.
- Gross margin (%)
- The share of revenue left after the cost of delivering the service.
- Churn (%)
- The percentage of customers who cancel each month.
- Expansion (%)
- The monthly growth in revenue from existing customers through upsells and cross-sells.
Why LTV Matters for SaaS
- Sets acquisition spend. LTV tells you how much you can afford to pay for a new customer and stay profitable.
- Guides growth. A business with a higher LTV can spend more on ads, onboarding and support.
- Measures retention. A rising LTV means customers stay longer, spend more or upgrade.
- Builds investor confidence. The LTV to CAC ratio is one of the first numbers investors ask for.
LTV to CAC Ratio
| LTV : CAC | Reading |
|---|---|
| Below 1 : 1 | You spend more to win a customer than the customer brings in. Not sustainable. |
| About 3 : 1 | The usual target for a healthy SaaS business. |
| Well above 3 : 1 | Very healthy, and there may be room to spend more on growth. |
How to Improve LTV
- Reduce churn. Improve onboarding, customer support and the product experience to keep customers longer.
- Increase account expansion. Offer tiered pricing, feature upgrades and add-ons.
- Raise gross margin. Streamline operations, automate repetitive tasks or renegotiate hosting and software costs.
- Deliver continuous value. Regular updates and useful features help customers see long-term value.
When to Use the SaaS LTV Calculator
- Planning marketing and acquisition budgets.
- Reporting LTV and retention metrics to investors.
- Testing how changes in churn or pricing affect profit.
- Comparing subscription models or plan tiers.
- Building financial forecasts for a SaaS startup.
Common Mistakes
- Mixing monthly and yearly figures. MRR, churn and expansion must all be monthly.
- Leaving out gross margin. Without it you get lifetime revenue, not lifetime value.
- Using a single unusual month. Average churn over several months for a steadier figure.
- Trusting very low churn. A 1% churn rate implies a 100 month lifetime, which a young company cannot yet confirm.
- Averaging very different plans. Work out LTV for each plan or segment when their ARPA and churn differ a lot.
How to Use the SaaS Lifetime Value Calculator
- Enter the number of customers. Type the number of paying customer accounts, such as 150.
- Enter the MRR. Type the monthly recurring revenue, such as 24,000. Commas are fine.
- Enter the gross margin. Type the gross margin as a percentage, such as 60.
- Enter churn and expansion. Type the monthly churn, such as 4, and the monthly account expansion, such as 2. Use 0 if there is no expansion.
- Read and copy the result. LTV appears as you type, with the working, ARPA and the customer lifetime in months. Press Copy to copy it, or Clear or Esc to start again.
Example: 50 customers, MRR 2,500, gross margin 70%, churn 5% and expansion 1%. The result is 766.50, with an ARPA of 50 and a customer lifetime of 20 months.
Who Can Use This Calculator?
Frequently Asked Questions (FAQs)
How do you calculate SaaS lifetime value?
Divide MRR by the number of customers to get ARPA, divide 1 by the monthly churn rate to get the customer lifetime in months, then multiply gross margin × lifetime × average ARPA. With no account expansion this is ARPA × gross margin ÷ churn.
What is the LTV with 150 customers, 24,000 MRR, 60% margin, 4% churn and 2% expansion?
It is 2,976. ARPA is 160, the lifetime is 25 months and ARPA averages 198.40 over that time, so 0.60 × 25 × 198.40 = 2,976.
What is SaaS lifetime value and why does it matter?
SaaS LTV is the amount your business can expect to earn from a customer over the whole subscription. It shows how much each customer is worth, which guides how much to spend on acquiring customers and on keeping them.
What is the difference between LTV and CAC?
LTV measures what you earn from a customer over the whole subscription. CAC measures what you spend to acquire that customer. A healthy LTV to CAC ratio is typically 3 : 1 or higher, and a ratio below 1 : 1 means you spend more on acquisition than you earn.
How can I increase my SaaS lifetime value?
Reduce churn with better onboarding and support, add tiered pricing or add-ons to encourage upsells, raise gross margin by cutting delivery costs, and keep customers engaged with regular product updates.
How often should I calculate LTV?
Monthly or quarterly suits most SaaS businesses, especially if MRR, churn or expansion change often. Update it whenever you introduce new plans or features.
What does account expansion mean?
It is the monthly growth in revenue from existing customers through upgrades, add-ons and cross-sells. In this calculator ARPA rises each month by this percentage of the starting ARPA.
Is the SaaS Lifetime Value Calculator free?
Yes. It is completely free, needs no sign-up, and can be used as many times as you like.
Sources
- For Entrepreneurs (David Skok). SaaS Metrics 2.0: A Guide to Measuring and Improving What Matters.
- Klipfolio. Customer Lifetime Value.
- Klipfolio. LTV:CAC Ratio: what it is and how to calculate it.
- Amplitude. How to Calculate, Interpret and Improve SaaS LTV.
- Wikipedia. Customer lifetime value.
- Wikipedia. Churn rate.
Try our SaaS Lifetime Value Calculator to see what each customer is worth.