Lifetime Value Calculator
Value a customer on gross profit rather than revenue, and see why lifetime value is convex in retention — small churn improvements produce disproportionate gains.
Lifetime Value Calculator
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What this result does not account for
- Assumes a constant monthly churn hazard; real retention curves flatten with age, which understates long-lived cohorts.
- A steady-state formula cannot capture a business whose pricing or mix is changing quickly.
- Where expansion exceeds churn the series does not converge and per-customer LTV stops being the right frame.
In short: At $310 of monthly revenue, 78% gross margin and 2% monthly churn, a customer is worth $12,090.00 — not the $15,500.00 a revenue-based calculation reports. Cutting churn to 1.5% adds $4,030.00, a 33.33% lift for half a percentage point.
Formula
Because LTV divides by churn, it is a reciprocal — not a straight line. Halving churn doubles lifetime value, which is why retention work compounds in a way that acquisition work does not.
Worked Example
- Convert revenue to gross profit. $310 of ARPA at 78% margin is $241.80. Serving the customer costs real money and that cost belongs in the valuation.
- Invert churn to get lifetime. 1 ÷ 2% is 50 months, or 4.17 years. This is the expected life of the account, not a guaranteed one.
- Multiply through. $241.80 × 50 is $12,090.00. On revenue the same customer would appear to be worth $15,500.00 — $3,410.00 of value that does not exist.
- Test the convexity. Cutting churn from 2.0% to 1.5% raises LTV to $16,120.00. That is $4,030.00, a 33.33% gain, from half a percentage point — because value scales with 1 ÷ churn.
- Add expansion if it is real. Net revenue retention above 100% offsets churn. At 108% NRR the effective net churn falls to 1.333% and lifetime value rises to $18,135.00.
The convexity is the whole argument for a customer-success budget. Moving churn from 5% to 3% is worth $3,224.00 of lifetime value per customer; moving it from 1.0% to 0.5% on the same economics is worth $24,180.00. Identical two-point and half-point improvements produce wildly different returns, and the returns get larger as you get better. Acquisition scales linearly with spend. Retention does not, which is why the same dollar spent on onboarding routinely outperforms a dollar spent on media.
Strengths & Limits Of This Model
Where this engine is strong
- Values the customer on gross profit, the treatment acquirers and investors use.
- Exposes the convexity that justifies retention investment.
- Offers an expansion-adjusted variant and optional present-value discounting.
Where it stops
- Highly sensitive to the churn input, which is itself often measured inconsistently.
- Steady-state maths ignores cohort ageing and seasonality.
Practical Use Cases
Setting the ceiling on acquisition spend
Lifetime value is the only defensible input to a CAC budget. Divide it by your target ratio using the LTV CAC Ratio Calculator.
Building the business case for customer success
A half-point of churn is worth 33% of lifetime value here. Quantify the churn side first with the Churn Rate Calculator.
Valuing a subscription book in a transaction
Acquirers value the recurring base on retained gross profit, not headline revenue. Carry the figure into the Business Valuation Calculator.
Deciding which segment to serve
If enterprise LTV is six times SMB LTV, an enterprise CAC six times higher is equally rational. Segment the calculation before concluding a channel is inefficient.
Methodology & Editorial Standards
Customer lifetime value is the gross profit expected from a customer over the whole relationship. This engine uses the standard steady-state formulation, ARPA multiplied by gross margin and divided by monthly churn, because dividing by churn is equivalent to summing a geometric series of surviving monthly contributions to infinity. Gross profit is used rather than revenue: revenue-based lifetime value systematically overstates the worth of a customer by the entire cost of serving them, which for SaaS at a 70% to 85% gross margin is a 20% to 40% overstatement. The reciprocal structure makes lifetime value convex in retention, so equal absolute improvements in churn produce increasingly large gains as churn falls, which is the analytical basis for prioritising retention spending over acquisition spending at the margin. An expansion-adjusted variant nets annualised net revenue retention above 100% against gross churn; where expansion exceeds churn the series does not converge and the correct treatment is cohort valuation over a finite horizon rather than a per-customer lifetime, which the engine reports rather than printing a misleading figure. A discount rate may be applied to present-value the stream. This model assumes a constant churn hazard, whereas real retention curves flatten as cohorts age, so long-lived books are generally undervalued by this approach. The engine implements the standard published formula for this calculation. Inputs are validated for domain and sign before evaluation, and any undefined case returns an em-dash rather than a spurious value.
Computation runs in IEEE-754 double precision at full internal precision; rounding to two decimal places occurs strictly at the display layer, so no cumulative drift enters the result. All monetary outputs use accounting presentation — grouped thousands, two decimals, negatives in parentheses — so figures can be transcribed directly into a model or working paper. Division-by-zero and out-of-domain inputs return an em-dash rather than a misleading number.
This engine was reconciled against an independent reference implementation and hand-verified for the worked example above before release. Our full five-stage review process is published on the About Us page.
Disclaimer. This calculator is provided for informational and modelling purposes only and does not constitute financial, tax, legal, medical, or engineering advice. Verify all figures with a qualified professional before acting on them.
Lifetime Value Calculator — 20 Expert FAQs
20 analyst-written answers to the questions practitioners actually ask — optimised for voice and answer-engine retrieval.
Should lifetime value use revenue or gross profit?
Gross profit. Revenue-based LTV ignores the cost of serving the customer and overstates value by the whole margin haircut — 28.21% in this default scenario, or $3,410.00 per customer.
What is the simplest LTV formula?
ARPA multiplied by gross margin, divided by monthly churn. Dividing by churn is equivalent to summing the surviving monthly contributions to infinity.
Why does halving churn double lifetime value?
Because LTV is proportional to 1 divided by churn. The relationship is a reciprocal, not a straight line, so retention gains compound in a way acquisition gains do not.
How much is half a point of churn worth?
At 2% monthly churn, cutting to 1.5% lifts LTV by exactly 33.33% — $4,030.00 per customer on these economics. The same half point is worth far more at lower churn levels.
What is a good LTV for B2B SaaS?
It is entirely segment dependent: roughly $15,000 to $40,000 for SMB, $80,000 to $200,000 for mid-market, and $300,000 to over $1,000,000 for enterprise.
Should I include expansion revenue in LTV?
If expansion is durable, yes — excluding it materially understates a customer with net revenue retention above 100%. At 108% NRR the value here rises from $12,090 to $18,135.
What if expansion exceeds churn?
Then the series does not converge and per-customer LTV is mathematically infinite. Value the cohort over a finite horizon instead, which is what this engine reports.
Should lifetime value be discounted?
For long-lived customers, yes. Cash arriving in year five is worth less than cash today, and a discount rate materially reduces LTV where lifetimes exceed a few years.
Why is my LTV so sensitive to small input changes?
Because churn sits in the denominator. A 0.5 point change in a 2% churn rate moves lifetime value by a third, which is why churn must be measured carefully.
How much of lifetime value arrives in year one?
On these defaults, $5,516.83 of the $12,090.00 total, or roughly 45.6%. The rest depends on customers surviving years two through five, which is a projection rather than a fact.
Does LTV assume constant churn?
This model does, which is the standard simplification. Real retention curves flatten as cohorts age, so long-lived books are generally undervalued by the steady-state formula.
What is the difference between LTV and CLV?
Nothing substantive — lifetime value and customer lifetime value are used interchangeably. What matters is whether the figure is built on revenue or gross profit.
How does LTV set my acquisition budget?
Divide lifetime value by your target ratio. At a 3:1 target and $12,090 of LTV, the maximum defensible acquisition cost is $4,030.00 per customer.
Can LTV be used for non-subscription businesses?
Yes, with repeat purchase rate standing in for churn. The ecommerce formulation uses average order value, purchase frequency and expected lifespan instead.
Why do investors discount reported LTV?
Because it is a projection built on a past churn rate persisting, and it is routinely the most optimistic figure in an operating model.
Is a very high LTV always good?
Only if the churn rate underpinning it is real. A high LTV derived from a short observation window on a young cohort is the classic way unit economics flatter a business.
Is this lifetime value calculator free to use?
Yes. It is free, requires no account, and has no usage limits. ApexConverter is funded by contextual advertising, never by selling user data.
Is my data sent to a server?
No. The engine runs as Vanilla JavaScript inside your browser under our Zero-Server Client-Side Execution model. Your figures are computed locally and are never transmitted, logged, or stored.
How accurate is this calculator?
It applies the standard closed-form formula in IEEE-754 double precision, rounding only at the display layer. The engine is reconciled against an independent reference implementation before release.
Does it work on mobile?
Yes. The interface is mobile-first with numeric keypad hints and is tested down to a 320-pixel viewport with no horizontal scrolling.