LTV-CAC Book
    Back to Tools

    Customer Lifetime Value (LTV) Calculator

    Calculate how much total gross profit you can expect from an average customer over their entire relationship with your business.

    Enter Your Numbers

    $

    Monthly revenue per customer

    %

    Revenue minus cost of goods sold

    %

    Percentage of customers who leave each month

    Your Results

    Enter your numbers to see results

    What is LTV?

    Customer Lifetime Value (LTV or CLV) represents the total revenue a business can expect from a single customer account throughout their entire relationship. It's one of the most important metrics for understanding the long-term value of your customer relationships and making informed decisions about acquisition spending.

    The LTV Formula

    LTV = ARPU × Gross Margin × Customer Lifetime

    Where Customer Lifetime = 1 / Monthly Churn Rate

    Common LTV Mistakes to Avoid

    • Using revenue instead of gross profit — LTV should reflect actual profit contribution
    • Ignoring churn — high churn dramatically reduces lifetime value
    • Using company-wide averages — segment your LTV by channel, cohort, and customer type
    • Forgetting to update — LTV changes as your product, pricing, and retention evolve
    • Confusing predicted vs. realized LTV — track both to validate your assumptions

    What Your LTV Results Mean

    Understanding your LTV number is only the first step. The real value comes from interpreting what that number means for your specific business model and stage. Here's how to contextualize your results:

    LTV Range (SaaS)What It MeansWhat To Do
    Under $500Low — high churn or low ARPUFocus on retention and pricing before scaling
    $500–$2,000Moderate — typical SMB SaaSOptimize onboarding and add expansion revenue
    $2,000–$10,000Strong — mid-market territoryScale acquisition, watch payback period
    $10,000+Enterprise-gradeInvest in sales team, accept longer payback

    LTV Formulas by Business Model

    Different business models require different approaches to calculating Customer Lifetime Value. The formula you use should reflect how your customers generate value over time.

    SaaS / Subscription Businesses

    LTV = (ARPU × Gross Margin) ÷ Monthly Churn Rate

    Example: A SaaS company with $100 ARPU, 75% gross margin, and 3% monthly churn has an LTV of ($100 × 0.75) ÷ 0.03 = $2,500.

    E-commerce / Retail

    LTV = AOV × Purchase Frequency × Customer Lifespan × Gross Margin

    Example: An e-commerce brand with $65 average order value, 4 purchases per year, 3-year average customer lifespan, and 40% gross margin has an LTV of $65 × 4 × 3 × 0.40 = $312.

    AI/ML SaaS (Variable Compute Costs)

    Contribution Margin LTV = (ARPU − Variable Compute Costs) ÷ Churn

    Why this matters: AI and ML-based SaaS companies often have significant per-user compute costs. Using standard LTV formulas overstates AI company economics by 30-60%.

    Embed This Calculator on Your Website

    Add this calculator to your website or blog. Simply copy the code below and paste it into your HTML.

    <iframe src="https://ltvcacbook.com/tools/ltv-calculator?embed=true" width="100%" height="600" frameborder="0" title="LTV Calculator by ltvcacbook.com"></iframe>

    Free to embed on any website or blog. Please keep the attribution link.

    Get the Complete Framework

    This calculator uses the methodology from "The Two Numbers That Build or Break Every Business" by Lech Kaniuk. The book includes the full Unit Economics Simulator, Impact Tables, and implementation playbooks for calculating and optimizing LTV across any business model.

    • The 3 levers to increase LTV (and the 1 cost lever that destroys it)
    • Cohort analysis templates for tracking realized vs. predicted LTV
    • The Stratification Model for segment-level LTV analysis
    Learn More About the Book →

    Frequently Asked Questions