Calculate SaaS customer lifetime value from monthly ARPA, gross margin and monthly customer churn, then compare gross-margin LTV with CAC when relevant.
This simplified churn-based LTV formula uses monthly ARPA, gross margin and monthly customer churn from a comparable period. It assumes churn and customer economics are reasonably stable; use cohort-based retention when they change materially with customer age.
This is a simplified steady-state SaaS LTV estimate. It is most useful when monthly ARPA, gross margin and monthly customer churn describe the same customer population. The reciprocal-churn lifetime is an expected-period shortcut under a stable churn assumption, not an observed average tenure. If retention changes strongly with customer age, plan, segment or contract type, cohort-based models are more defensible.
Read gross-margin LTV separately from revenue LTV, and keep LTV distinct from the dedicated LTV:CAC ratio. A high modeled LTV can still be fragile if it depends on a small churn denominator, concentrated customers or assumptions that do not hold across cohorts.
The calculator uses the common simplified SaaS relationship Gross-Margin LTV = Monthly ARPA × Gross Margin ÷ Monthly Customer Churn. The inputs must use compatible units: a monthly ARPA should be paired with a monthly customer churn rate, and the churn input should measure lost customer accounts rather than lost recurring revenue.
The model is most useful as a scenario and unit-economics diagnostic. Test churn, ARPA and gross-margin changes one at a time. If churn is front-loaded, expansion is material, or customer economics vary substantially by segment, replace the steady-state shortcut with cohort retention or cash-flow analysis before using the output for material budgeting decisions.
CAC is included only as context. Entering a positive CAC lets the page display LTV:CAC and gross-margin LTV after CAC, but the dedicated SaaS LTV:CAC and CAC Payback tools own deeper acquisition-efficiency analysis.
Read the matching guide for definitions, formula context, worked examples, reporting boundaries and common mistakes.
Disclaimer: This calculator provides estimates for planning and educational purposes only. Results depend on the assumptions and definitions entered and should not be treated as accounting, financial, legal, tax, valuation or investment advice. Validate material decisions with qualified professionals and your source systems.