LTV Calculator

Lifetime value (LTV) estimates the total gross margin a typical customer generates before they leave. For subscriptions, it combines monthly revenue per user (ARPU), expected lifespan, and the margin you keep after direct delivery costs.

LTV answers how much you can afford to spend acquiring a customer. If LTV is £1,200 and CAC is £100, the LTV:CAC ratio is 12:1 — headroom exists if those numbers hold in practice.

LTV models are sensitive to churn assumptions. Small changes in average lifespan move LTV significantly.

LTV is total gross or net value expected from a customer over the relationship. It answers how much a customer is worth before you decide acquisition spend.

Simple models use ARPU × margin × lifetime months; lifetime links to churn (lifetime ≈ 1 ÷ churn for exponential models).

Compare with CAC calculator and churn impact calculator.

Monthly ARPU of £50 over 24 months gives £1,200 gross lifetime revenue. At 100% gross margin, LTV equals £1,200.

With CAC of £100, the LTV:CAC ratio is 12:1. Many growth teams treat 3:1 as a rough floor for sustainable paid acquisition; 12:1 suggests strong unit economics if churn and margin assumptions are realistic.

If average lifespan falls to 12 months, LTV drops to £600 and the ratio becomes 6:1 — still healthy, but half the earlier estimate.

Monthly revenue £60, gross margin 80% → £48 monthly contribution. Over 12 months → £576 gross-profit LTV before discounting.

If lifetime extends to 18 months with better retention, LTV rises to £864 — retention work increases allowable CAC.

If margin is 60%, same lifetime yields £432 — cost to serve matters as much as headline price.

Use observed churn or retention data, not wishful lifespan. Discount aggressive expansion revenue unless it is historically reliable.

Compare LTV:CAC with payback period — how many months until gross margin recovers CAC. A high ratio with a three-year payback can still strain cash flow.

Simple LTV = monthly revenue × margin × average lifetime months. From churn: lifetime months ≈ 1 ÷ monthly churn rate for rough estimates.

Use gross-profit LTV when comparing to CAC payback on margin.

Cohort analysis beats one average when retention curves are uneven.

After pricing changes, product-market shift, or support cost spikes.

When churn moves — LTV falls faster than headline revenue suggests.

Before setting CAC targets for sales and marketing.

Reduce churn via product and success.

Upsell and cross-sell to raise ARPU.

Improve margin on delivery cost.

Annual prepay lengthens effective relationship.

Expand use cases so customers stay.

A single average lifetime of 14 months hides cohorts that churn in 3 months after a pricing change and cohorts that stay 24 months on legacy plans. Update LTV when mix shifts toward new plans.

Expansion revenue — seat adds, usage tiers — can raise LTV without changing headline churn. Model starting ARPU and expansion rate separately if upsell is a material motion.

Use churn impact calculator monthly to see whether retention moves justify higher allowable CAC before you change LTV assumptions in fundraising decks.

Using revenue LTV while comparing to CAC payback on gross margin — inflate safety by 20–40% in high-COGS businesses if you skip margin in LTV.

Extending lifetime from early-adopter retention when later segments behave worse — refresh after the first 500 customers on a new tier, not only launch cohorts.

Forgetting discounting in multi-year LTV — undiscounted sums overstate present value when payback matters for cash runway.

Refresh LTV when pricing, packaging, or support cost per user changes — static LTV in a deck goes stale quickly.

Compare gross-profit LTV to CAC calculator output monthly; ratio below 3:1 is a scale warning for many SaaS models.

Cohort charts beat one lifetime average when you have enough customers — use this calculator for quick scenarios, cohorts for board truth.

This page should target LTV calculator, customer lifetime value calculator, ARPU lifetime value, LTV to CAC ratio, and gross margin LTV searches.

It calculates gross lifetime revenue, gross-margin-adjusted LTV, and a simple LTV:CAC ratio from ARPU, lifespan, gross margin, and CAC. It does not build cohort retention curves, derive lifespan from churn, model expansion revenue, discount future cash flows, or segment LTV by plan.