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★ How much gross profit is one customer worth?

Customer Lifetime Value (LTV) Calculator

Calculate customer lifetime value from ARPA, gross margin and churn. Free LTV calculator with the formula, a worked example and how to compare it with CAC.

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$

Monthly, per paying account.

%

Revenue minus hosting, support and COGS.

%

Share of customers lost per month.

Your LTV

$3,200

  • Average customer lifetime: 33.3 months (1 ÷ churn).
  • Gross profit per month per account: $96.

LTV = (ARPA × gross margin) ÷ monthly churn rate

LTV: $3,200.

LTV is mostly a retention number. I build the onboarding and in-product moments that make customers stay longer.

Let's talk
01

How it works

LTV = (ARPA × gross margin) ÷ monthly churn rate

Revenue overstates what a customer is worth, because some of it pays for servers, support and payment fees. Multiplying by gross margin gives the profit each customer contributes per month.

Dividing by monthly churn turns that into a lifetime: if 3% leave each month, the average customer stays about 33 months. This is the simple, steady-state version of LTV. It assumes churn is constant, which early on it rarely is.

02

Worked example

A B2B tool charging $120 a month per account, with 80% gross margin and 3% of customers leaving each month.

LTV worked example
InputValue
Average revenue per account$120
Gross margin80.0%
Monthly churn3.0%
LTV$3,200
03

Benchmarks

LTV has no target on its own. It only means something next to what you pay to acquire a customer. The widely cited rule from David Skok is LTV at least 3× CAC.

Source: David Skok, SaaS Metrics 2.0 (Matrix Partners).

04

How to improve it

  • Cut early churn. Most customers who leave do so in the first weeks, before they reach the core value.
  • Raise prices or add a higher tier for the customers who already get the most out of the product.
  • Build expansion paths (seats, usage, add-ons) so revenue per account grows over time.
  • Lower cost to serve: cheaper infrastructure and self-serve support lift gross margin.
05

Questions founders actually ask

Should LTV use revenue or gross margin?
Gross margin. Revenue-based LTV overstates what a customer is worth by including money that goes straight to hosting, support and payment fees. Investors will recalculate it with margin anyway.
How do I calculate LTV with very little churn data?
With under a year of data, churn is noisy and LTV swings wildly. Use a conservative churn assumption, cap the lifetime (many teams cap it at three to five years), and say clearly that it is an estimate.
Why is my LTV so high?
Low churn makes the formula explode, because lifetime is 1 ÷ churn. At 0.5% monthly churn the implied lifetime is 200 months, which no one believes. Cap the lifetime or use cohort data instead.
What is a good LTV?
There is no universal number. A $5,000 LTV is excellent if acquiring a customer costs $500 and terrible if it costs $6,000. Compare it with CAC using the LTV:CAC calculator.
06

Related metrics

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07

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Fine print

Tools: on the house.
Engineer: by the hour.

Moving them is the expensive part, and the part I'm good at: activation flows, upsell moments and the product work behind better numbers.

I'm Himanshu, an AI and full-stack engineer. I build MVPs, AI agents and the growth plumbing around them for early-stage startups.

Hire me →My projects