Customer Lifetime Value Calculator
LTV is monthly gross profit divided by churn, not revenue divided by churn. This customer lifetime value calculator shows both figures side by side, along with LTV:CAC and how long acquisition takes to earn back.
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Lifetime value is monthly gross profit divided by churn — not revenue divided by churn. This customer lifetime value calculator shows both, so the gap between the number you can defend and the number in the deck is visible rather than argued about.
ARPA — what one account pays you a month.
Revenue less cost to serve. Software typically 70–85%.
Share of customers lost each month.
Sales and marketing spend ÷ new customers.
Quoting revenue rather than gross profit would put this at $8,000 — $1,600 of it being cost to serve that never reaches you. The average customer stays 40.0 mo, which is 3.2× the payback period.
LTV is a forecast dressed as a measurement. If you are building the product largely on your own, Tekk turns what you want into specs your coding agent can actually execute.
The formula
LTV = (ARPA × gross margin) ÷ churn rate
ARPA is average revenue per account for the period, gross margin is what survives cost to serve, and churn is the share of customers lost in that same period. Use monthly inputs and the lifetime comes out in months.
Worked example
A $200-a-month account at an 80% gross margin, losing 2.5% of customers a month, acquired for $2,000:
| Step | Working | Result |
|---|---|---|
| Monthly gross profit | $200 × 80% | $160 |
| Average lifetime | 1 ÷ 2.5% | 40 months |
| Lifetime value | $160 ÷ 2.5% | $6,400 |
| LTV : CAC | $6,400 ÷ $2,000 | 3.2x |
| CAC payback | $2,000 ÷ $160 | 12.5 months |
The number most people quote instead
Drop the margin term and the same customer looks worth $8,000 rather than $6,400. The $1,600 gap is cost to serve — hosting, support, payment processing — money that leaves the business every month whether or not it appears in the calculation.
The error scales with how much it costs you to serve a customer:
| Gross margin | Revenue ÷ churn | Gross profit ÷ churn | Overstated by |
|---|---|---|---|
| 80% | $8,000 | $6,400 | 25% |
| 50% | $8,000 | $4,000 | 100% |
At an 80% margin it is a rounding error people argue about. At 50% it doubles the answer, and every decision downstream — what you can afford to pay for a customer, how fast you can grow — inherits the mistake.
What the chart shows
Gross profit accumulates month by month, but the cohort shrinks while it does. After 40 months — one average lifetime — the $160-a-month customer has produced about $4,075, not the $6,400 a straight line would suggest. The remainder arrives slowly over a long tail, from the customers who stay.
That gap is the honest argument for retention work. Cutting churn does not just extend the line, it lifts the whole curve.
Where it breaks down
Three assumptions are doing a lot of work here.
Churn is constant. It usually is not — early churn runs far higher than churn among customers who have been with you two years, so a blended rate understates the value of a mature cohort and overstates a new one.
ARPA never changes. Expansion revenue is invisible to this formula. A business whose accounts grow over time will find the real figure sits above this one.
Nothing is discounted. Money arriving in month 40 is treated as worth the same as money arriving today. Valuation work applies a discount rate and lands on a lower number; this is the undiscounted version that board decks quote.
How it works
- 1
Enter revenue, margin and churn
Monthly revenue per account, the gross margin left after cost to serve, and the share of customers you lose each month. The margin field is the one most tools omit, and leaving it out is what produces the number nobody can defend in a data room.
- 2
Add your CAC to get the ratio
Acquisition cost turns lifetime value into a decision. The customer lifetime value calculator divides one by the other for the LTV:CAC ratio investors ask for, and works out how many months of gross profit it takes to earn the acquisition back.
- 3
Read the curve against the straight line
The chart accumulates gross profit month by month. The straight line is what you would earn if nobody ever left; the curve is what churn actually delivers, flattening toward the lifetime value. The space between them is the case for retention work.
Frequently asked questions
- How do you calculate customer lifetime value?
- Multiply monthly revenue per account by gross margin to get monthly gross profit, then divide by the monthly churn rate. A $200 account at 80% margin contributes $160 a month; at 2.5% monthly churn that is $6,400 of lifetime value.
- Why does this customer lifetime value calculator show two numbers?
- Because the two get used interchangeably and they are not the same. Revenue ÷ churn gives $8,000 on those inputs; gross profit ÷ churn gives $6,400. The $1,600 difference is cost to serve — real money that leaves the business — and quoting the first figure as lifetime value is the most common error in the metric.
- What should a lifetime value of customer calculator include?
- At minimum a margin term and a churn basis. A lifetime value of customer calculator that asks only for revenue and churn cannot tell the difference between an 80%-margin software business and a 20%-margin reseller, and will hand both of them the same answer for very different companies.
- Why does a SaaS LTV calculator need gross margin?
- Because hosting, support and payment processing scale with each customer, so they belong in the calculation. A SaaS LTV calculator that skips the margin term overstates value by 20% at an 80% margin and by 100% at 50% — the lower the margin, the worse the error.
- What is a good LTV to CAC ratio?
- 3.0x is the figure most commonly cited for software businesses — earning three dollars of gross profit for every dollar spent on acquisition. Much below it and growth burns cash faster than it creates value; much above it and the usual reading is underinvestment in sales rather than excellence.
- How is CAC payback period calculated?
- Acquisition cost divided by monthly gross profit per customer. At a $2,000 CAC and $160 of monthly gross profit that is 12.5 months. Under 12 months is generally considered healthy for a business selling to other businesses; the number matters more than LTV:CAC when cash is tight, because it is when the money comes back rather than whether it does.
- Should churn be monthly or annual?
- Whichever you use, the lifetime comes out in the same unit. This tool takes monthly churn and returns lifetime in months. Do not convert by multiplying by twelve — 2.5% monthly churn is about 26% annually, not 30%, because the base shrinks each month.
- What does average customer lifetime mean here?
- One divided by the churn rate. At 2.5% monthly churn the average customer stays 40 months. It is an average over a decaying cohort, not a prediction about any individual account — half the value arrives in the first 27 months and the tail takes considerably longer.
- Can LTV be infinite?
- The formula says yes at zero churn, which is why this tool returns an em dash rather than a number there. No cohort has never lost a customer; a zero in that field almost always means the churn figure has not been measured yet rather than that it is genuinely zero.
- Does this account for expansion revenue?
- No, and that is a real limitation. A business with strong net revenue retention grows the value of accounts it keeps, which this formula cannot see — it assumes a flat ARPA for the whole lifetime. If expansion is a meaningful part of your growth, treat the result as a floor rather than an estimate.
- Why is my LTV number different from my accountant's?
- Usually one of three things: revenue rather than gross profit, a mismatched churn basis (monthly against annual), or discounting. Serious valuation work discounts future cash flows, which lowers the figure — this calculator does not, so it returns an undiscounted lifetime value. That is the standard version quoted in board decks.
- Do you store the numbers I enter?
- No. The calculation runs entirely in your browser. Nothing is sent to a server, nothing is logged, and there is no account. Disconnect from the internet and it will still work.
- Why is this free, and what is Tekk?
- Tekk is a spec-driven development platform for people building software with AI coding agents. This calculator costs us nothing to run, and the founders working out unit economics are often the same people building the product. No signup, no run limit, no upsell inside the tool.
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