SaaS LTV Calculator

How to Use the SaaS LTV Calculator and Interpret the Results

The SaaS LTV calculator is a simple browser-based tool. You enter three values: revenue per customer (ARPU) per month, monthly customer churn as a percentage, and gross margin as a percentage. By default, the fields contain 29, 3.5, and 80. Amounts are shown in US dollars. The tool does not save or export files and does not send data to a server.

After you enter the data, you get three results: LTV from revenue, LTV from gross margin, and average customer lifetime. For the default values, the calculator shows: LTV from revenue $828.57, LTV from gross margin $662.86, average customer lifetime 28.6 months (2.4 years).

Interpret them together. LTV from revenue tells you how much revenue a customer will generate on average before they leave. LTV from gross margin shows how much of that revenue remains after direct costs. Average customer lifetime helps you estimate how long the average customer stays with you at the assumed churn rate.

Numeric example: with ARPU of $29 and churn of 3.5%, monthly churn as a decimal is 0.035. LTV from revenue is 29 / 0.035 = $828.57. LTV from gross margin is 29 times 80% / 0.035 = $662.86. Average lifetime is 1 / 0.035 = 28.6 months, or about 2.4 years.

How to Determine ARPU, Monthly Churn, and Gross Margin

ARPU is the average monthly revenue per customer. Calculate it as monthly subscription revenue / number of active customers in that month. If you have different plans, you can use a weighted average or split customers into groups and calculate separately.

Monthly churn is the percentage of customers who left in a given month. The simplest formula: number of customers lost in the month / number of customers at the start of the month times 100%. Try to calculate it for the same period you enter in the calculator. If you have quarterly data, do not enter it as monthly without converting it.

Gross margin is the portion of revenue that remains after direct costs. Formula: (revenue - direct costs) / revenue times 100%. In SaaS, direct costs usually include product maintenance, hosting, infrastructure, and support, but not all sales and marketing costs. A value of 100% means you are calculating LTV from full revenue, without subtracting costs.

Use consistent data. If you calculate ARPU from gross revenue, calculate margin from a similar basis. Otherwise, the results will be hard to compare.

LTV from Revenue vs LTV from Gross Margin — Which to Choose

LTV from revenue is the simplified version: ARPU divided by monthly churn. It shows the revenue value a customer delivers on average. In the calculator, for $29 ARPU and 3.5% churn, it gives $828.57. This number is useful when you want to quickly compare channels, plans, or customer groups by revenue scale alone.

LTV from gross margin takes direct costs into account. You calculate it as ARPU times gross margin / churn. At an 80% margin, it gives $662.86. This is usually a better basis for deciding on a customer acquisition budget, because it shows how much money remains after direct costs before you spend on sales and marketing.

Which should you choose? If you are asking how much revenue a customer brings in, use LTV from revenue. If you are setting how much you can spend to acquire a customer and want to assess profitability, use LTV from gross margin. When margin is 100%, both results are the same. In practice, the difference between them grows as margin falls.

Remember that LTV is not the same as net profit. Even LTV from margin does not subtract all fixed costs, taxes, or acquisition costs. Treat it as a starting point for further analysis.

How to Read Average Customer Lifetime from Churn

Average customer lifetime follows directly from churn. With constant monthly churn, it is 1 / monthly churn, or 100 / churn in percentage terms, in months. For 3.5% churn, that is 100 / 3.5 = 28.6 months, or about 2.4 years.

The interpretation is simple: the lower the churn, the longer a customer stays on average. A lower churn rate would produce a longer average lifetime and higher LTV, even if ARPU stays the same. This shows how strongly even a small change in churn can affect LTV.

Do not treat this lifetime as a guarantee for any single customer. Some will leave after a month, others will stay for years. It is an average for a group under the assumption that churn is constant. If churn changes from month to month, the result is only an estimate.

Average lifetime also helps you plan support and product development. If customers stay for only a short time, it is worth checking whether the problem lies in onboarding, product value, pricing, or communication. The calculator does not diagnose causes, but it shows the scale of the issue.

Limitations and What the Tool Does Not Calculate (CAC, Discounting, Expansion, Variable Churn)

The SaaS LTV calculator calculates only three results from three inputs: ARPU, monthly churn, and gross margin. It does not include customer acquisition cost (CAC), so it does not calculate CAC payback or return on CAC. It does not subtract platform fees, commissions, taxes, fixed costs, team costs, or marketing costs.

The tool does not discount future cash flows. It does not answer the question of what today's money is worth a year from now. It does not model revenue expansion, meaning a situation in which a customer later buys a more expensive plan, adds modules, or increases usage. It also does not account for variable churn, seasonality, different pricing plans, or differences between customer groups.

The result is an estimate when your company is young, has little data, changes pricing often, or acquires customers of very different quality. In such cases, a single average can hide important differences. It is better to calculate LTV separately for segments, plans, or acquisition channels.

Also, do not assume that the rates in the tool match your situation. The default values are only a starting point. Check your tools' current pricing, infrastructure costs, and real customer data. The tool does not save or export files and does not send data to a server.

Frequently Asked Questions

The tool calculates locally based on the assumptions you enter; results are estimates and do not replace professional financial analysis.