Churn-Adjusted LTV Calculator
Estimate customer lifetime value from monthly revenue, gross margin and churn — the churn rate sets how long a customer stays, which is what really drives LTV.
How it works
Average lifetime (months) = 1 ÷ monthly churn · LTV = ARPU × gross margin ÷ monthly churn
A customer’s expected lifetime is the reciprocal of the churn rate: lose 3% a month and the average account survives about 33 months. Multiplying monthly revenue by that lifetime — and by gross margin, so you count profit rather than top-line — gives the churn-adjusted lifetime value. Because churn sits in the denominator, small improvements in retention move LTV far more than an equal-sized price increase.
Worked example
At $60 ARPU, 80% gross margin and 3% monthly churn, lifetime is 1 ÷ 0.03 ≈ 33.3 months. LTV = 60 × 0.80 ÷ 0.03 = $1,600 in gross profit; the revenue-only figure is 60 ÷ 0.03 = $2,000.
Frequently asked questions
Why divide by churn instead of multiplying by a fixed lifespan?
For a constant churn rate the average lifetime is exactly 1 ÷ churn, which comes from summing a geometric series of survival probabilities. Dividing revenue by churn is the same as multiplying by that expected lifetime.
Should LTV use gross margin or full revenue?
Use gross margin for decisions — it is the money left after serving the customer, so it is what you can spend to acquire the next one. The revenue-only figure overstates value, especially for low-margin businesses.
How does LTV relate to CAC?
A healthy SaaS aims for an LTV that is at least three times its customer acquisition cost. If your churn-adjusted LTV barely covers CAC, either retention or pricing needs work before you scale spend.
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Educational estimate, not financial advice.