LTV Calculator
Calculate Customer Lifetime Value (LTV) using multiple methods. Essential SaaS metric for growth planning.
Customer LTV
$600
Strong unit economics. You can afford to invest more in acquisition.
LTV Breakdown
Industry LTV:CAC Benchmarks
Best-in-class SaaS companies aim for 3x+ LTV:CAC. Netflix's LTV is estimated at $600+ per subscriber.
Amazon Prime members spend ~$1,400/year vs $600 for non-Prime - showing the power of retention.
Dollar Shave Club's $1B exit was built on predictable LTV from subscription razors.
Top mobile games like Candy Crush see LTVs of $30-50 for paying users.
🚀Ways to Increase Your LTV
Upsells, bundles, and premium tiers can boost AOV 20-40%
A 5% increase in retention can increase profits 25-95%
Email campaigns and loyalty programs drive repeat purchases
Proactive support and onboarding prevent early cancellations
Simple LTV: Average Purchase Value x Purchase Frequency x Customer Lifespan
Traditional LTV: (Monthly ARPU x Gross Margin) / Monthly Churn Rate
LTV:CAC Ratio: Customer Lifetime Value / Customer Acquisition Cost
The Magic Number: A 3:1 LTV:CAC ratio is considered the gold standard for sustainable growth. Below 1:1 means you're losing money on every customer.
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About This Calculator
How much is a customer really worth to your business? The Customer Lifetime Value (LTV) Calculator answers the most critical question in business: how much revenue will a customer generate over their entire relationship with you. Understanding LTV determines how much you can spend to acquire customers, which segments to prioritize, and whether your business model is sustainable.
Why LTV matters more than ever in 2026: With customer acquisition costs (CAC) rising 60%+ across digital channels since 2020, the businesses winning today are those maximizing the value of customers they already have. Amazon Prime members spend 4-5x more than non-members. Netflix spends $17 billion annually on content to reduce churn by just 1%. They understand that LTV is the game.
The formula that drives billion-dollar decisions:
- Simple LTV: ARPU × Average Customer Lifespan
- Advanced LTV: (ARPU × Gross Margin) / (1 + Discount Rate - Retention Rate)
- The Golden Ratio: LTV should be at least 3× your Customer Acquisition Cost (CAC)
What this calculator reveals: Enter your average revenue per user (ARPU), customer lifespan, retention rate, and acquisition costs. Get instant calculations of simple LTV, DCF-adjusted LTV, LTV:CAC ratio, and CAC payback period. See exactly how much you can afford to spend acquiring customers while building a profitable, scalable business.
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How to Use the LTV Calculator
- 1**Enter your Average Revenue Per User (ARPU)**: Include subscription fees, one-time purchases, and any expansion revenue. Use monthly ARPU for subscription businesses or annual for transactional businesses.
- 2**Input your average customer lifespan**: How long does the typical customer stay before churning? Use months for high-churn businesses, years for B2B or loyalty-based models.
- 3**Add your gross margin percentage**: Revenue minus cost of goods sold. SaaS typically 70-85%, e-commerce 30-50%, services 50-70%. This converts revenue LTV to profit LTV.
- 4**Enter your discount rate (for advanced LTV)**: Use your cost of capital or target return rate (typically 10-15%). This adjusts future cash flows to present value.
- 5**Input your monthly retention rate**: What percentage of customers stay month-to-month? 95% retention means 5% monthly churn. This drives the advanced LTV formula.
- 6**Add your Customer Acquisition Cost (CAC)**: Total sales and marketing spend divided by new customers acquired. Include ads, sales salaries, tools, and related overhead.
- 7**Review your LTV:CAC ratio**: Target 3:1 or higher. Below 3:1 indicates unsustainable unit economics. Above 5:1 suggests you may be under-investing in growth.
- 8**Calculate by segment**: Run separate calculations for different customer types (enterprise vs SMB, organic vs paid, etc.) to identify your most valuable segments.
LTV Calculation Formulas
Simple LTV Formula: LTV = ARPU x Average Customer Lifespan
Example:
- ARPU: $50/month
- Average lifespan: 24 months
- LTV = $50 x 24 = $1,200
Advanced LTV Formula (DCF Method): LTV = (ARPU x Gross Margin) / (1 + Discount Rate - Retention Rate)
Example:
- ARPU: $100/month
- Gross margin: 70%
- Monthly retention rate: 95%
- Discount rate: 10% annually (0.83% monthly)
- LTV = ($100 x 0.70) / (1 + 0.0083 - 0.95)
- LTV = $70 / 0.0583 = $1,200
Why Use the Advanced Formula:
- Accounts for profit, not just revenue
- Discounts future cash flows to present value
- Works with retention rates instead of guessing lifespan
- More accurate for subscription businesses
Jar Insight: How Amazon and Netflix Pioneered LTV Thinking
The Bezos Customer Obsession Jeff Bezos famously said, "We see our customers as invited guests to a party, and we are the hosts." This mindset revolutionized how businesses think about customer value.
Amazon's LTV Strategy:
- Amazon Prime members spend 4-5x more than non-members
- Prime LTV estimated at $2,500+ over membership lifetime
- Bezos accepted losses on individual transactions knowing LTV would compensate
- Free shipping "loses money" on single orders but increases purchase frequency 3x
Netflix's Retention Machine:
- Netflix spends $17 billion annually on content to reduce churn by just 1%
- A 1% churn reduction can increase LTV by 10-15%
- Their algorithm optimizes for "next episode watched" because engagement predicts retention
- LTV of a Netflix subscriber: ~$650 over average 25-month lifespan
The Key Insight: Both companies realized that maximizing short-term profit per transaction destroys long-term value. They optimize for customer lifetime, not quarterly earnings.
What This Means For You:
- Spend more to acquire customers if LTV justifies it
- Invest in retention before acquisition
- Accept short-term losses for long-term customer relationships
The Golden Ratio: LTV to CAC
The 3:1 Rule: Your LTV should be at least 3x your Customer Acquisition Cost (CAC).
| LTV:CAC Ratio | Interpretation |
|---|---|
| <1:1 | Losing money on every customer |
| 1:1 - 2:1 | Barely breaking even |
| 3:1 | Healthy, scalable business |
| 4:1 - 5:1 | Excellent unit economics |
| >5:1 | May be under-investing in growth |
Example Calculation:
- LTV: $3,000
- CAC: $800
- LTV:CAC = 3.75:1 (Healthy)
CAC Payback Period: CAC Payback = CAC / (ARPU x Gross Margin)
Example:
- CAC: $800
- Monthly ARPU: $100
- Gross margin: 70%
- Payback = $800 / ($100 x 0.70) = 11.4 months
Target Payback Periods:
- SaaS: Under 12 months
- E-commerce: Under 6 months
- Consumer apps: Under 3 months
Warning Signs:
- LTV:CAC below 3:1 means unsustainable growth
- Payback over 18 months ties up too much capital
- Declining LTV:CAC indicates market saturation or product issues
Industry LTV Benchmarks
SaaS (Software as a Service):
| Segment | Typical LTV |
|---|---|
| SMB SaaS | $1,000 - $5,000 |
| Mid-market SaaS | $5,000 - $25,000 |
| Enterprise SaaS | $25,000 - $500,000+ |
E-commerce:
| Category | Typical LTV |
|---|---|
| Fashion/Apparel | $150 - $300 |
| Beauty/Cosmetics | $200 - $400 |
| Consumer Electronics | $100 - $250 |
| Luxury Goods | $500 - $2,000+ |
| Subscription Boxes | $200 - $600 |
Mobile Apps & Gaming:
| Type | Typical LTV |
|---|---|
| Casual mobile games | $0.50 - $3 |
| Mid-core games | $5 - $25 |
| Hardcore games | $20 - $100+ |
| Subscription apps | $30 - $150 |
Other Industries:
| Industry | Typical LTV |
|---|---|
| Insurance | $3,000 - $10,000 |
| Banking | $5,000 - $20,000 |
| Fitness memberships | $500 - $2,000 |
| Coffee shops (loyal customer) | $1,000 - $3,000 |
| Auto dealerships | $50,000 - $150,000 |
Key Insight: Your LTV benchmark depends on your business model. A $500 LTV is excellent for e-commerce but concerning for enterprise SaaS.
LTV by Customer Segment
Why Segment LTV Matters: Your average LTV hides crucial variations. Top 20% of customers often drive 80% of revenue.
Common Segmentation Approaches:
By Acquisition Channel:
| Channel | Example LTV | Why |
|---|---|---|
| Organic search | $2,400 | High intent, researched buyers |
| Paid social | $1,200 | Impulse buyers, lower retention |
| Referrals | $3,600 | Trust-based, similar to referrer |
| Influencer | $900 | Trend-followers, lower loyalty |
By Customer Tier:
- Free tier: $0 (conversion focus)
- Basic: $600 (volume play)
- Pro: $2,400 (sweet spot)
- Enterprise: $24,000+ (high-touch)
By First Purchase:
- Customers who buy premium first: 2.5x higher LTV
- Customers who use discounts first: 40% lower LTV
- Customers from bundles: 1.5x higher retention
Action Items:
- Calculate LTV separately for each major segment
- Allocate CAC budget to highest-LTV segments
- Build different retention strategies per segment
- Consider "firing" negative-LTV customer segments
How to Increase Customer Lifetime Value
The Three Levers of LTV:
Every LTV improvement comes from one of three levers:
1. Increase ARPU (Average Revenue Per User)
| Strategy | Typical Impact | Implementation |
|---|---|---|
| Price increase | 10-20% ARPU lift | Test 10% increase, monitor churn |
| Upselling | 15-30% ARPU lift | Offer premium tiers at point of value |
| Cross-selling | 10-25% ARPU lift | Bundle complementary products |
| Usage-based pricing | 20-40% ARPU lift | Align price with value delivered |
| Add-ons & features | 5-15% ARPU lift | Create optional paid enhancements |
2. Extend Customer Lifespan (Reduce Churn)
| Strategy | Typical Impact | Implementation |
|---|---|---|
| Onboarding optimization | 20-40% churn reduction | First 90 days are critical |
| Customer success team | 15-30% churn reduction | Proactive outreach to at-risk |
| Engagement features | 10-25% churn reduction | Increase product stickiness |
| Annual contracts | 30-50% churn reduction | Offer discounts for commitment |
| Community building | 10-20% churn reduction | Create switching costs |
3. Improve Gross Margin
| Strategy | Typical Impact | Implementation |
|---|---|---|
| Automation | 5-15% margin gain | Reduce manual service costs |
| Self-service | 10-20% margin gain | Enable customers to solve issues |
| Efficient infrastructure | 5-10% margin gain | Optimize cloud/hosting costs |
| Tiered support | 3-8% margin gain | Match service level to value |
The 5% Retention Rule: A 5% improvement in customer retention can increase LTV by 25-95%, depending on your business. This makes retention the highest-ROI investment for most companies.
Cohort Analysis: The Key to Accurate LTV
Why Cohort Analysis Matters:
Average LTV across all customers can be misleading. Customer quality changes over time as you scale, enter new markets, or shift channels. Cohort analysis tracks LTV by customer acquisition date.
Building a Cohort Analysis:
Step 1: Group Customers by Join Date
| Cohort | Month 1 | Month 3 | Month 6 | Month 12 | Projected LTV |
|---|---|---|---|---|---|
| Jan 2025 | $100 | $85 | $72 | $58 | $1,200 |
| Apr 2025 | $100 | $82 | $68 | $52 | $1,040 |
| Jul 2025 | $100 | $78 | $62 | TBD | $950 (proj) |
| Oct 2025 | $100 | $75 | TBD | TBD | $900 (proj) |
What This Reveals:
- LTV is declining with newer cohorts
- Retention is dropping (retention curve is steeper)
- Earlier cohorts were higher quality
Step 2: Identify the Problem
Common causes of declining cohort LTV:
- Scaling into lower-quality traffic sources
- Market saturation (early adopters vs mainstream)
- Product-market fit drift
- Competitive pressure
- Pricing changes
Step 3: Fix the Root Cause
| If LTV declining because... | Solution |
|---|---|
| Lower-quality traffic | Shift budget to proven channels |
| Market saturation | Expand to new segments/markets |
| Product issues | Customer research + product fixes |
| Competition | Differentiation or price/value |
Cohort LTV Benchmarks:
| Trend | Interpretation |
|---|---|
| Flat cohorts | Sustainable business model |
| Improving cohorts | Product-market fit improving |
| Declining cohorts | Warning sign - investigate |
| Volatile cohorts | Inconsistent targeting or quality |
LTV for Different Business Models
SaaS (Software as a Service):
| Metric | SMB SaaS | Mid-Market | Enterprise |
|---|---|---|---|
| Typical ARPU | $50-200/mo | $500-2,000/mo | $5,000-50,000/mo |
| Average Lifespan | 12-24 months | 24-36 months | 36-60 months |
| Gross Margin | 70-80% | 75-85% | 80-90% |
| Typical LTV | $1,000-5,000 | $10,000-50,000 | $50,000-500,000 |
| Target LTV:CAC | 3:1 | 3:1 - 5:1 | 4:1 - 6:1 |
Key SaaS insight: Net Revenue Retention (NRR) > 100% means existing customers grow faster than they churn, creating "negative churn" that supercharges LTV.
E-commerce:
| Model | Typical LTV | Driver |
|---|---|---|
| One-time purchase | $50-200 | ARPU only, lifespan = 1 |
| Repeat purchase | $200-1,000 | Purchase frequency key |
| Subscription | $300-2,000 | Retention is everything |
| Marketplace | Varies | LTV of both buyers and sellers |
Key e-commerce insight: Email capture + lifecycle marketing can 3-5x LTV by driving repeat purchases.
Marketplaces & Platforms:
Calculate LTV for both sides:
- Supply-side LTV: How much does a seller/provider generate?
- Demand-side LTV: How much does a buyer/user generate?
- Network LTV: Combined value when both sides engage
Mobile Apps & Games:
| Category | Day 1 Retention | Day 30 Retention | Typical LTV |
|---|---|---|---|
| Casual games | 40-50% | 5-10% | $0.50-3 |
| Mid-core games | 35-45% | 8-15% | $5-25 |
| Social apps | 30-40% | 10-20% | $10-50 |
| Utility apps | 50-60% | 20-30% | $20-100 |
Key mobile insight: Day 1 and Day 7 retention strongly predict LTV - optimize onboarding first.
Pro Tips
- 💡Always calculate LTV by customer segment, not just overall average - your top 20% of customers likely drive 80% of total LTV.
- 💡Focus on reducing churn before increasing acquisition - improving retention from 90% to 95% can double LTV.
- 💡Include only gross profit in LTV calculations, not revenue, for accurate unit economics that drive smart CAC decisions.
- 💡Update your LTV model quarterly and compare predicted vs actual to improve accuracy over time.
- 💡Use CAC payback period alongside LTV:CAC ratio - high LTV means nothing if payback takes 3+ years and you run out of cash.
- 💡Track cohort-based LTV to catch declining customer quality before it becomes a crisis - early warning is everything.
- 💡Consider negative churn (expansion revenue) in your LTV model if existing customers regularly upgrade - this is the SaaS superpower.
- 💡Set different LTV:CAC targets for different segments - enterprise can justify $10K+ CAC while SMB may need under $500.
- 💡Optimize the first 90 days aggressively - early engagement strongly predicts lifetime value and most churn happens early.
- 💡If LTV:CAC exceeds 5:1, you may be under-investing in growth - test increasing CAC to see if quality holds.
- 💡For subscription businesses, offer annual plans with discounts - the upfront cash improves payback and reduces churn.
- 💡Build switching costs through integrations, data lock-in, and community - these increase LTV by making leaving painful.
Frequently Asked Questions
For new businesses, use cohort analysis with early data and project forward. Track your first 3-6 months of customers, measure their retention curve, and extrapolate. Start with simple LTV (ARPU x estimated lifespan) and refine as you gather more data. Most startups begin with industry benchmarks and adjust based on actual performance.
