LTV Calculator

What is LTV?

Customer lifetime value (LTV) is the total gross profit a business can expect from a single customer over the entire relationship. It's the number that tells you how much you can afford to spend acquiring a customer and still come out ahead — everything from ad budgets to sales headcount should trace back to it.

Worked example (SaaS): $80/mo ARPU, 80% gross margin, 3% monthly churn. LTV = 80 × 0.80 ÷ 0.03 = $2,133.

FAQ

What is a good LTV:CAC ratio?

3:1 is the standard rule of thumb — for every dollar spent acquiring a customer, you want at least three dollars back over their lifetime. Below 3:1 your margins are thin; below 1:1 you're losing money on every customer. Above roughly 5:1 can actually signal you're under-investing in growth and leaving acquisition budget on the table.

SaaS LTV vs ecommerce LTV — why different formulas?

SaaS revenue is recurring and subscription-based, so LTV is driven by churn — how long, on average, a customer keeps paying. The formula (ARPU × margin ÷ churn) models an ongoing subscription that ends when the customer cancels. Ecommerce revenue comes from discrete repeat purchases instead, so LTV is modeled as order value × purchase frequency × how many years someone keeps buying — there's no subscription or churn rate to divide by.

How do I increase LTV?

For SaaS: reduce churn (the biggest lever — even small churn reductions compound over time), raise ARPU through upsells or pricing changes, or improve gross margin. For ecommerce: increase purchase frequency with retention campaigns, raise average order value with bundles or upsells, or extend how many years customers keep buying through loyalty programs and better product experience.