Audited —·Last updated 29 Jul 2026·6 citations·Tier 1·0 uses

Customer Lifetime Value (LTV) Calculator

Free customer lifetime value calculator. Get the simple, discounted and fixed-horizon LTV side by side, with the churn assumption shown, not buried.

Customer Lifetime Value Calculator

Which LTV do you want?
Average recurring revenue per account per month, before cost of revenue. Use the figure for the cohort you are valuing, not the whole book — enterprise and self-serve customers should never be averaged together.
$
Revenue less cost of revenue — hosting, support, payment fees, third-party licences — as a percentage. Typical B2B SaaS runs 70–85%. Enter 100 only if you deliberately want a revenue LTV, which must never be compared to CAC.
%
Share of customers lost each month. This is the single largest driver of the answer, and there is no defensible LTV without it. 3% monthly is roughly 31% a year. Use logo churn, not revenue churn, unless you also switch ARPA to a revenue-weighted figure.
%
Your cost of capital, converted internally to a monthly effective rate. 10% a year is 0.7974% a month. Enter 0 to ignore the time value of money; the simple method ignores it regardless of what you put here.
%
How many months of the relationship to count. Used only by the fixed-horizon method. Three years is a common choice for an early-stage company, because an infinite-horizon LTV assumes the business outlives the customer.
months
Customer lifetime value
$2,452.20
Gross profit from one customer over the whole relationship. Every LTV rests on a churn assumption — and one constant churn rate understates a base with mixed churn rates.
Monthly gross profit per customer
$96.00
Average lifetime
33.3 mo
Simple LTV
$3,200.00
Discounted LTV
$2,452.20
Monthly discount rate
0.7974%
LTV as months of ARPA
20.435×
Method
Discounted perpetuity, margin at month end

Background.

Customer lifetime value is the gross profit one customer is expected to produce across the whole relationship. It is the number that decides whether buying growth makes sense, because it is the ceiling on what you can rationally pay to acquire a customer. This calculator returns three LTVs at once — the widely quoted simple form, the discounted perpetuity used in the academic literature, and a fixed-horizon version — so you can see immediately how much of your LTV is a fact about your business and how much is a choice of method.

The most important thing to understand is that there is no such thing as an LTV without a churn assumption. Churn is what converts a monthly margin into a lifetime, and it drives the answer more than anything else you can type. On this page's default inputs — $120 a month of revenue, an 80% gross margin, 3% monthly churn, a 10% annual discount rate — halving churn from 3% to 1.5% lifts the discounted LTV from $2,452.20 to $4,115.93, a 68% increase. Halving the discount rate from 10% to 5% lifts it only to $2,732.87, an 11% increase. That asymmetry is not an artefact of these particular numbers: Gupta, Lehmann and Stuart measured it directly across Capital One, Amazon, eBay, Ameritrade and E*Trade in the Journal of Marketing Research and found retention elasticities of 2.45 to 6.75 against a discount-rate sensitivity roughly a fifth of that. The churn field on this page is required, and it is deliberately the third input rather than an advanced setting.

The three methods differ in how they treat time. The simple form, ARPA × gross margin ÷ churn, is the one most SaaS writing quotes; it is the sum of an undiscounted stream that books the first month's margin immediately. On the defaults that gives $3,200. The discounted form is margin × [retention ÷ (1 + discount − retention)], the closed form given in Farris, Bendle, Pfeifer and Reibstein's Marketing Metrics and used by Gupta and colleagues; it discounts every month and books the first margin at the end of month one, subject to churn in that month. That gives $2,452.20 — about 30% below the simple figure on these inputs. The fixed-horizon method truncates the same discounted stream, and at 36 months returns $1,836.79. All three describe the same customer. If someone quotes you an LTV without saying which of these they used, the number carries a range of roughly 1.7× on typical SaaS inputs.

There are two ways the answer can be wrong in a direction the arithmetic will not reveal, and both belong here rather than in a footnote. The first pushes it up. Applying a single constant churn rate to a real customer base is systematically optimistic in the short run and pessimistic in the long run, and on balance biased: Fader and Hardie showed in Marketing Science that because high-churn customers leave first, the surviving cohort's retention rate rises every year, and a valuation built on one aggregate rate understated their example customer base by 38%. The related trap is the one Gupta's own paper warns about — converting churn into an expected lifetime and then valuing a fixed annuity over that many years. With a $100 annual margin, 80% retention and a 12% discount rate the correct answer is $250; the five-year-annuity shortcut gives $360, an overestimate of about 44%. This calculator never uses that shortcut.

The second limitation pushes it down. This model holds the monthly margin flat, so it counts no expansion revenue at all. A business with net revenue retention above 100% is growing the margin on customers it already has, and for that business every figure on this page is a floor rather than an estimate. Similarly, gross margin, not revenue, is the correct numerator — Bessemer describes lifetime value as "the gross margin-affected value of a customer" — and an LTV computed on revenue is inflated by one over your gross margin, 25% at an 80% margin. That number must never be compared to a CAC.

Finally, LTV means very little on its own. It becomes a decision when you divide it by customer acquisition cost, or convert it into a payback period; both of those calculators are linked below. If you publish the number, the standard to hold yourself to is SEC Release 33-10751: define the metric, state how it is calculated, disclose the assumptions behind it, and say so if you change the method between periods.

What is customer lifetime value calculator?

Customer lifetime value (LTV, or CLV) is the present value of the gross profit a customer is expected to generate over the entire relationship. The MASB Common Language Marketing Dictionary defines it as "the dollar value of a customer relationship, based on the present value of the projected future cash flows from the customer relationship," and gives the standard closed form as margin × [retention rate ÷ (1 + discount rate − retention rate)] when margin and retention are constant. That model carries six stated assumptions: constant margin per period, constant retention probability, a specified discount rate, customers who are lost for good once they leave, the first margin received at the end of the first period subject to retention, and an infinite horizon. This calculator implements that form as its discounted method, adds the undiscounted ARPA × gross margin ÷ churn variant used throughout SaaS practice, and adds a truncated version for anyone unwilling to assume an infinite horizon. LTV is not a GAAP measure and no standards body defines it. It is a forward-looking estimate built on a retention assumption, not a measurement of anything that has already happened, and it is only as good as the churn number underneath it.

How to use this calculator.

  1. Pick a cohort, not a company. LTV for a customer base with both $50-a-month self-serve accounts and $5,000-a-month enterprise contracts is an average of two different businesses and is useful to neither.
  2. Enter monthly ARPA for that cohort — average recurring revenue per account per month, before cost of revenue.
  3. Enter gross margin: revenue less hosting, support, payment processing and third-party licence costs, as a percentage. Leave 100 only if you specifically want a revenue LTV.
  4. Enter monthly churn for the same cohort. This is the input that matters most. Use logo churn if ARPA is a plain average; use revenue churn only if ARPA is revenue-weighted to match.
  5. Set the annual discount rate to your cost of capital, or 0 to ignore the time value of money. The page converts it to a monthly effective rate and shows you that rate.
  6. Choose a method. Read all three anyway — the gap between them tells you how much of your headline LTV is method choice. Then take the figure into the LTV:CAC ratio and CAC payback calculators, where it turns into a spending decision.

The formula.

LTV = m · r ⁄ (1 + d − r) · LTV_simple = m ⁄ c · LTV_N = m · k(1 − kᴺ) ⁄ (1 − k)
m · monthly gross profit per customer = ARPA × GM%c · monthly churn rate (decimal)r · monthly retention = 1 − cd · monthly discount rate = (1 + annual)^(1/12) − 1k · r ⁄ (1 + d)N · horizon in months

Monthly gross profit per customer, m, is ARPA multiplied by gross margin. Monthly churn c becomes retention r = 1 − c. The annual discount rate is converted to a monthly effective rate d = (1 + annual)^(1/12) − 1, which is reported as its own output because it is an assumption, not a detail. The simple method sums an undiscounted stream that begins immediately, m + mr + mr² + … = m ÷ c. The discounted method sums a discounted stream that begins at the end of month one, mr/(1+d) + mr²/(1+d)² + … = m · r ÷ (1 + d − r); note that 1 + d − r simplifies to d + c, which is strictly positive whenever churn is above zero, so the perpetuity can never diverge. That is why zero churn raises a field error rather than returning infinity. The fixed-horizon method truncates the same series at N terms, giving m · k(1 − kᴺ) ÷ (1 − k) with k = r ÷ (1 + d). Rounding happens at exactly one place. All arithmetic runs on a private forty-significant-digit decimal context, so nothing elsewhere in the site can change these answers, and the only non-terminating intermediate is the twelfth root in the discount conversion. Every output is rounded once, at the moment it is returned, to ten decimal places; the display then shows two. There is no intermediate rounding and no threshold that a rounded intermediate could push a result across.

A worked example.

Example

A B2B SaaS company sells a $120-a-month plan. After hosting, support and payment fees it keeps 80 cents on the dollar, so monthly gross profit per customer is $96.00. Three per cent of customers cancel each month, which implies an average lifetime of 33.33 months, and the company discounts at 10% a year — 0.7974% a month once converted. On the discounted method the calculator returns a lifetime value of $2,452.20: that is $96.00 of monthly gross profit multiplied by 0.97 ÷ (0.007974 + 0.03), a margin multiple of 25.54 months. Expressed against top-line revenue it is 20.43 months of ARPA. The two comparison tiles show what the other conventions would have said. The simple ARPA × gross margin ÷ churn form returns $3,200.00 — 30% higher, because it discounts nothing and books the first month's margin on day one instead of at month end. Switch the method to fixed horizon and the same stream truncated at 36 months returns $1,836.79, three quarters of the perpetuity, which is the number a pre-Series-A company should probably be using given that it has not yet proved it will exist in year four. Now consider which lever to pull. Cutting churn from 3% to 1.5% raises the discounted figure to $4,115.93, an increase of 68%. Cutting the cost of capital from 10% to 5% raises it to $2,732.87, an increase of 11%. If this company also knows its customer acquisition cost — say $600 — then at $2,452.20 the LTV:CAC ratio is 4.1:1, comfortably past the 3× threshold Bessemer recommends before leaning into acquisition spend, and it would recover that $600 in roughly 6.3 months of gross profit. Had it quoted the $3,200 simple figure instead, the same business would have reported 5.3:1 and looked materially healthier than it is.

horizon Months36
methoddiscounted
arpa Per Month120
monthly Churn Rate Percent3
annual Discount Rate Percent10
gross Margin Percent80

Frequently asked questions.

What is the formula for customer lifetime value?
The standard closed form for a constant margin and a constant retention rate is LTV = margin × [retention ÷ (1 + discount rate − retention)], which the MASB Common Language Marketing Dictionary publishes from Farris, Bendle, Pfeifer and Reibstein's Marketing Metrics. In SaaS practice the same idea is usually written undiscounted as ARPA × gross margin ÷ monthly churn. Both are on this page. On the worked example — $96 of monthly gross profit, 3% monthly churn, 10% a year discount rate — the discounted form gives $2,452.20 and the undiscounted form gives $3,200.00. They are the same model with different assumptions about when cash arrives and whether it is discounted.
Should LTV use revenue or gross profit?
Gross profit, always, if you intend to compare it to anything. Bessemer describes customer lifetime value as "the gross margin-affected value of a customer," and Gupta, Lehmann and Stuart's model uses a margin per period rather than revenue. The reason is that the revenue a customer generates is not money you keep — hosting, support, payment processing and third-party licence costs come out first. An LTV computed on revenue is larger by one over your gross margin: at an 80% margin it overstates by 25%. That inflated number is particularly dangerous next to CAC, because CAC is a real cash outflow while revenue LTV is not a real cash inflow. Set gross margin to 100 on this page only if you know exactly why you are doing it.
Which method should I use — simple, discounted or fixed horizon?
Use the discounted method for anything that leaves your building: it is the form the academic literature and the marketing-metrics standard both give, and it does not pretend a dollar in month 40 is worth a dollar today. Use the fixed-horizon method if your company is early enough that an infinite horizon is not credible — a business two years old assuming it will still be serving a customer in year twelve is making a claim it cannot support, and 36 months is a defensible cut. Use the simple form when you need to communicate quickly with people who expect the familiar ARPA × gross margin ÷ churn number, but say so, and be aware it runs about 30% high on typical SaaS inputs.
What churn rate should I use in the LTV calculation?
Monthly logo churn for the cohort you are actually valuing, measured over enough months to be stable. Two mismatches cause most errors. The first is unit mismatch: if your ARPA is a plain average across accounts, use customer (logo) churn; if your ARPA is revenue-weighted, use revenue churn, or the two will not describe the same population. The second is mixing cohorts: a customer base containing $50 self-serve accounts churning at 6% and $5,000 enterprise contracts churning at 0.5% has no meaningful blended LTV. Compute one per segment. If you only have an annual churn figure, the monthly equivalent is 1 − (1 − annual)^(1/12), not the annual figure divided by twelve.
Why might my calculated LTV be too high?
Three reasons, in order of how often they bite. First, the horizon: an infinite-horizon perpetuity assumes your company outlives every customer relationship, which very few early-stage companies can claim. Second, the shortcut Gupta, Lehmann and Stuart explicitly warn against — converting a retention rate into an expected lifetime and then valuing a fixed annuity over that many years. With a $100 annual margin, 80% retention and a 12% discount rate the correct answer is $250 while the annuity shortcut gives $360, an overestimate of about 44%. This calculator never uses that shortcut. Third, using revenue instead of gross profit, which inflates the result by one over your gross margin.
Why might my calculated LTV be too low?
Because a single constant churn rate is a downward-biased description of a real customer base. Fader and Hardie demonstrated in Marketing Science that cohort retention rates rise over time, not because customers get more loyal but because the high-churn ones leave first and the survivors were always stickier. Applying one aggregate rate to their five-cohort example understated the value of the customer base by 38%. The second reason is expansion revenue: this model holds monthly margin flat, so a business with net revenue retention above 100% is producing margin the model never counts. If both apply to you, treat the figure here as a floor and model your cohorts separately.
What discount rate should I use?
Your cost of capital — the return an investor could get on a comparable-risk alternative. Venture-backed software companies commonly use something in the 10% to 20% range for internal analysis; the default here is 10% a year, which the calculator converts to a monthly effective rate of 0.7974% and shows you. Enter 0 if you want to ignore the time value of money, but understand what that means: at a zero discount rate the discounted method still sits exactly one month's gross profit below the simple one, because it books the first margin at the end of month one subject to churn rather than immediately. The discount rate matters far less than churn — halving it on the worked example moves LTV by 11%, while halving churn moves it by 68%.
What is a good LTV to CAC ratio?
Bessemer Venture Partners recommends investing in customer acquisition when CLTV to CAC is 3× or better, and notes that below 1× you are losing money on every additional customer you buy. David Skok's guideline is the same threshold, adding that the best SaaS businesses run higher than 3 and sometimes as high as 7 or 8. The important caveat is that a ratio computed from a revenue LTV, or from an infinite-horizon LTV at a company that cannot credibly promise an infinite horizon, will clear 3× while meaning nothing. Compute the ratio on gross-profit LTV and a fully-loaded CAC, and pair it with the payback period, which tells you how long your cash is tied up.
Does this LTV include expansion revenue or upsells?
No, and that is a deliberate limitation rather than an omission. Every formula on this page holds the monthly margin constant, which is the assumption the MASB entry lists first. Modelling expansion means letting m grow with time, and once you do that the closed form no longer applies — you need either a cohort model or a formula with an explicit growth term, such as the expanded version David Skok publishes for businesses with negative net churn. If your net revenue retention is meaningfully above 100%, read the figures here as the value of the relationship as it exists today, and treat any upsell you subsequently make as incremental.
How is LTV different from net present value?
LTV is a specific application of net present value, with a retention rate doing extra work. A general NPV discounts a cash-flow stream you specify. LTV discounts a stream you do not fully specify — instead of listing the payments, you assert a constant margin and a constant probability that the customer is still there to pay it, and the model constructs the stream for you. That makes LTV much easier to compute and much easier to get wrong, because the two assertions carry the whole answer. If you have a real forecast of the payments, discount it directly with a present-value or NPV calculator; use an LTV model when you have a churn rate and a margin and nothing more granular.

References& sources.

  1. [1]Gupta, S., Lehmann, D. R., & Stuart, J. A. (2004). "Valuing Customers." Journal of Marketing Research, 41(1), 7–18. Equation (2) gives LV = Σ m_t r^t/(1+i)^t; footnote 3 works the example m=$100, r=80%, i=12% to $250 and shows the five-year-annuity shortcut ($360) overestimating by about 44%; Table 4 reports retention elasticities of 2.45–6.75. Author copy hosted by Columbia Business School; retrieved 2026-07-29.
  2. [2]MASB / Common Language Marketing Dictionary — "Customer Lifetime Value," sourced to Farris, P. W., Bendle, N. T., Pfeifer, P. E., & Reibstein, D. J., Marketing Metrics: The Definitive Guide to Measuring Marketing Performance (2nd ed., 2010) and Peppers & Rogers (1997). Gives CLV = Margin × [retention ÷ (1 + discount − retention)] and lists the six assumptions, including "first margin received at end of first period (with retention probability)." Retrieved 2026-07-29.
  3. [3]Fader, P. S., & Hardie, B. G. S. (2010). "Customer-Base Valuation in a Contractual Setting: The Perils of Ignoring Heterogeneity." Marketing Science, 29(1), 85–93. Shows that a valuation built on a single aggregate retention rate "underestimates the value of the customer base by 38%" on their worked example, because cohort retention rises as high-churn customers leave first. Author copy; retrieved 2026-07-29.
  4. [4]Skok, D. "SaaS Metrics 2.0 — Detailed Definitions," forEntrepreneurs.com. Source of the simple form, LTV = ARPA × GM% ÷ monthly churn rate, and of the LTV:CAC guideline ("this number should be higher than 3"). Undated revision, current as retrieved 2026-07-29.
  5. [5]Bessemer Venture Partners — D'Onofrio, M. "Scaling to $100 Million" (updated 2024 edition, PDF). Defines CLTV as "the gross margin-affected value of a customer to a business over the course of its relationship" and recommends investing in acquisition at CLTV/CAC of 3x or better, noting customers are unprofitable below 1x. Retrieved 2026-07-29.
  6. [6]U.S. Securities and Exchange Commission — "Commission Guidance on Management's Discussion and Analysis of Financial Condition and Results of Operations," Release Nos. 33-10751; 34-88094; FR-87, issued 30 January 2020. Requires a company disclosing a metric to give a clear definition and calculation, the reasons it is useful, how management uses it, and any change in the method of calculation. Federal Register text via GovInfo; retrieved 2026-07-29.
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