Calculate SaaS customer lifetime value, LTV:CAC ratio, CAC payback period, and net revenue retention. Includes cohort survival analysis and churn sensitivity.
Customer Lifetime Value (LTV) is the single most important metric in SaaS economics. It measures the total gross margin revenue you can expect from an average customer over their entire relationship with your company. Combined with Customer Acquisition Cost (CAC), the LTV:CAC ratio tells you whether your business is building or destroying value with every customer you acquire.
The standard SaaS LTV formula is deceptively simple — ARPU divided by churn rate, multiplied by gross margin — but the nuances matter enormously. Monthly vs annual churn produces wildly different numbers (5% monthly churn = 46% annual churn, not 60%). Expansion revenue from upsells and cross-sells can offset churn and even produce negative net churn, meaning your cohorts grow over time. And discounting future cash flows at your cost of capital gives a more realistic present-value LTV.
This calculator models all of these dynamics: simple LTV, gross-margin LTV, DCF-adjusted LTV, cohort survival curves, and comprehensive churn sensitivity analysis. Whether you're an operator optimizing unit economics, an investor evaluating a SaaS business, or a founder stress-testing your pricing model, these metrics will ground your decisions in data.
Intuition about SaaS unit economics fails — a seemingly small churn reduction (3% to 2% monthly) increases LTV by 50%. This calculator quantifies the exact impact of churn, pricing, and expansion on your business economics, helping you prioritize the highest-leverage improvements. Keep these notes focused on your operational context. Tie the context to the calculator’s intended domain.
Simple LTV = ARPU / Net Monthly Churn Rate Net Monthly Churn = Gross Churn − Expansion Rate Gross Margin LTV = Simple LTV × Gross Margin % LTV:CAC Ratio = Gross Margin LTV / Customer Acquisition Cost CAC Payback = CAC / (Monthly ARPU × Gross Margin) Avg Customer Lifetime = 1 / Net Monthly Churn Rate (months) DCF LTV = Σ (Monthly Revenue × GM × Survival Rate) / (1 + Discount Rate)^month
Result: LTV $12,500 | LTV:CAC 2.5x | Payback 13.3 months
At $500/mo ARPU with 3% monthly churn, average customer lifetime is 33 months. LTV = $500 × 33 = $16,667 × 75% GM = $12,500. With $5,000 CAC, LTV:CAC = 2.5x (below the 3x target). CAC payback = $5,000 / ($500 × 0.75) = 13.3 months (over the 12-month ideal). Reducing churn to 2% would push LTV:CAC to 3.75x.
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The industry standard is 3:1 or higher. Below 1:1 means you're losing money on every customer. 1-3x is marginal — you're making money but growth is risky. Above 3x is healthy. Above 5x suggests you may be under-investing in growth. David Skok (venture capitalist) popularized the 3x benchmark.
Under 12 months for most SaaS businesses. Under 6 months is excellent. Payback over 18 months puts strain on cash flow and makes growth capital-intensive. Enterprise SaaS with annual contracts can tolerate slightly longer payback (12-18 months) because of higher retention.
Monthly churn = 1 − (1 − annual churn)^(1/12). For example, 30% annual churn = 1 − 0.70^(1/12) = 2.9% monthly. Do NOT divide by 12: 30%/12 = 2.5% monthly, which understates the actual churn because it ignores compounding.
NRR measures revenue change in an existing cohort: (Beginning Revenue − Churned Revenue + Expansion Revenue) / Beginning Revenue. NRR > 100% means expansion exceeds churn — your existing customers generate more revenue over time even without new sales. Top SaaS companies achieve 120-140% NRR.
Expansion revenue (upsells, cross-sells, seat expansions) directly reduces net churn. If gross churn is 3% but expansion rate is 1%, net churn is 2% — increasing LTV by 50% (from 33 months to 50 months). With enough expansion, net churn can go negative, meaning cohorts grow indefinitely.
Yes, for rigorous analysis. Simple LTV assumes a dollar earned in month 36 is worth the same as today, but it's not. DCF-adjusted LTV discounts future revenue by your cost of capital (typically 10-15% for SaaS). This is more conservative and more accurate, especially for businesses with long customer lifetimes.