Free SaaS Calculators
LTV Calculator
Discover the true value of your customers with Churnkey's Lifetime Value Calculator. Easily calculate your SaaS customer LTV, visualize how churn impacts revenue, and make data-driven decisions to maximize profitability. Start planning smarter growth strategies today!
Calculate your LTV
Average Revenue Per User (ARPU)
Churn Rate
Gross Margin
$2,000
Customer Lifetime Value (LTV)
This means each customer is worth $2,000 over their lifetime, given the churn rate and gross margin you've provided.
What is customer lifetime value (LTV)?
What is LTV and why does it matter?
Customer Lifetime Value (LTV) is one of the most important metrics in any subscription-based business, especially SaaS. It represents the total revenue a business expects to earn from a customer during their entire relationship. Instead of focusing solely on short-term earnings, LTV helps businesses understand the long-term financial contribution of each customer.
In simple terms, LTV tells you...
“How much is a customer really worth to my business?”
How does LTV work?
LTV is calculated by combining a few key data points about your customers:
1
Average Revenue Per User (ARPU)
The average amount of revenue a customer generates over a specific time period (monthly or yearly).
2
Gross Margin
The profit margin after accounting for the costs of delivering your product or service.
3
Churn Rate
The percentage of customers who leave or cancel their subscription during a specific period.
LTV =
ARPU x Gross Margin
Churn Rate
Here’s the formula
Why should I care about LTV?
Understanding and optimizing LTV is critical for several reasons:
1. Plan Smarter Growth Strategies
When you know your LTV, you can confidently invest in marketing and customer acquisition...2. Improve Customer Retention
LTV highlights the financial impact of losing customers. High churn rates drastically reduce LTV, which can cripple growth.3. Prioritize Profitability
LTV reveals how much profit you’re making over time, helping you balance short-term acquisition costs against long-term gains. This is particularly important in SaaS, where initial profits may be lower due to subscription-based pricing.4. Measure Business Health
LTV, when compared to Customer Acquisition Cost (CAC), gives you a vital health check of your business. A healthy SaaS business often has an LTV:CAC ratio of 3:1 or higher. If your LTV is too low, it may indicate issues with retention or pricing.How to improve your LTV
If your LTV isn’t where you’d like it to be, here are actionable steps:
1. Reduce Churn
Focus on retaining customers by improving onboarding, offering exceptional customer service, and using proactive communication to reduce cancellations.2. Increase ARPU
Upsell or cross-sell premium features and ensure pricing reflects the value of your product.3. Boost Gross Margins
Minimize costs associated with delivering your service without compromising quality.4. Understand Customer Needs
Use data-driven insights to continuously improve your product and offer solutions that keep customers engaged and loyal.Why LTV matters to SaaS businesses
LTV is more than just a number—it’s a blueprint for sustainable growth. By focusing on LTV, you gain a clearer picture of your business’s potential and the steps you need to take to maximize revenue and customer retention. Whether you’re looking to scale, secure funding, or simply stabilize your business, understanding LTV is an essential first step.
Take the guesswork out of your customer value calculations. Use Churnkey’s SaaS Churn & LTV Calculator to get precise insights and start making data-driven decisions today!
Let us reveal your churn metrics and help you improve retention.
We’ll take you on a quick, friendly, no-pressure walkthrough of what we do...
