How the SaaS customer lifetime value calculator works
A simple SaaS customer lifetime value model links monthly account revenue, delivery margin and customer churn. If a constant proportion of accounts leaves each month, the inverse churn rate estimates average lifetime in months. Multiplying that lifetime by monthly gross profit produces a rough lifetime contribution before acquisition costs.
LTV to CAC then compares that estimated contribution with the cost of acquiring an account. The ratio can support scenario planning, but it is not a promise about future returns. It depends strongly on churn: a small change in a low estimated churn rate can move lifetime value dramatically.
Gross-profit LTV = monthly ARPA × (gross margin ÷ 100) ÷ (monthly customer churn ÷ 100)
Worked example
Start with the example inputs below. The calculator opens with these values; reset the example at any time to compare your own scenario. Monetary examples use GBP, and all amounts must use the same currency.
| Measure | Value |
|---|---|
| Monthly revenue per account | 200 |
| Gross margin (%) | 80 |
| Monthly customer churn (%) | 2 |
| Customer acquisition cost | 2400 |
| Measure | Value |
|---|---|
| Gross-profit customer lifetime value | £8,000.00 |
| Implied average lifetime | 50 months |
| LTV to CAC | 3.33× |
A constant monthly churn model excludes expansion, cohort variation and discounting. Zero churn cannot imply a finite lifetime value.
How to use the result
Use customer or logo churn rather than net revenue churn. Expansion can make net revenue churn negative, which does not describe customer survival in this model. Match ARPA, margin and churn to the same customer segment and avoid combining new-customer pricing with churn from a mature cohort.
Check the result against observed cohort revenue and retention whenever enough history exists. In a young business, a very low recent churn rate may reflect short customer tenure rather than a proven long lifetime. Use several plausible churn scenarios when reviewing acquisition budgets.
Assumptions and common mistakes
This steady-state estimate excludes account expansion, contraction, discounting and variation by customer age. Zero churn does not justify infinite LTV and is rejected. A high ratio can also coexist with a long cash recovery period, so examine CAC payback alongside lifetime value.