Customer Lifetime Value (LTV) Calculator Widget
Embed the standard subscription LTV formula. Readers enter monthly ARPA, gross margin and monthly churn to see the average customer lifetime and lifetime gross profit; adding CAC shows the LTV:CAC ratio next to the widely quoted 3:1 bar.
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<iframe src="https://a2z.tools/embed/w/ltv-calculator" title="Customer Lifetime Value (LTV) Calculator by A2Z Tools" width="100%" height="480" style="border:0;width:100%" loading="lazy" allow="clipboard-write"></iframe>
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<div data-a2z-widget="ltv-calculator" data-height="480"></div> <script async src="https://a2z.tools/embed.js"></script>
Adds a small script (what it does) that sizes the widget to fit its content, loads it lazily and keeps it isolated from your page's CSS.
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How it works
With a constant monthly churn rate c, the average customer stays 1 / c months: 2.5% a month means 40 months. Lifetime value is the gross profit a customer brings over that lifetime, LTV = ARPA x gross margin / churn, the form given in David Skok's SaaS Metrics 2.0 definitions. A 100-a-month account at 75% gross margin and 2.5% churn is worth 100 x 0.75 / 0.025 = 3,000 of gross profit, from 4,000 of lifetime revenue. Using gross margin rather than revenue matters: hosting, support and payment costs are paid for every month the customer stays. If you add the cost to acquire a customer, the widget divides LTV by CAC; Skok's rule of thumb is that viable SaaS businesses have LTV above three times CAC. A churn rate of zero is refused because it implies an infinite lifetime, and lifetimes above ten years trigger a warning, since few investors trust churn that low.
Calculation method
- Average customer lifetime (months) = 1 / monthly churn rate
- LTV = ARPA x gross margin % / monthly churn rate
- Lifetime revenue = ARPA / monthly churn rate
- LTV:CAC = LTV / CAC (benchmark > 3)
Worked examples
SMB SaaS
Inputs: ARPA 100; gross margin 75%; churn 2.5% a month; CAC 900
Result: LTV 3,000; lifetime 40 months; lifetime revenue 4,000; LTV:CAC 3.33:1
Just above the 3:1 benchmark.
Thinner economics
Inputs: ARPA 50; gross margin 80%; churn 5% a month; CAC 400
Result: LTV 800; lifetime 20 months; LTV:CAC 2.00:1
Below 3:1 - lower churn or cheaper acquisition is needed.
An illustration of a standard metric formula, not financial or investment advice.
Limitations
- Assumes constant churn and flat ARPA; expansion revenue and price rises are not modelled.
- No discounting of future gross profit, so long lifetimes are overstated.
- Averages hide segments: enterprise and self-serve customers should be calculated separately.
Where publishers use it
- Growth-marketing blogs deciding how much to spend per acquired customer
- Startup pitch-deck guides explaining unit economics
- Subscription e-commerce and membership businesses
- Angel-investor education sites
- B2B SaaS pricing articles comparing plan tiers by lifetime value
Questions
Why multiply by gross margin?
Because LTV should measure what a customer contributes after the cost of serving them. A 100-a-month customer at 75% margin contributes 75 a month; over a 40-month lifetime that is 3,000, not 4,000.
Where does the 3:1 LTV:CAC benchmark come from?
It is David Skok's widely cited SaaS rule of thumb: LTV should exceed three times CAC, alongside recovering CAC within 12 months. Far above 5:1 can mean the company is under-investing in growth.
What if churn is very low?
The formula then gives very long lifetimes - 0.5% a month is 200 months, almost 17 years - which few businesses can credibly claim. Many investors cap the lifetime at 3-5 years or use a discount rate; the widget warns above 10 years.
Should I use customer churn or revenue churn?
Use customer (logo) churn with ARPA, as in the formula. If you have strong expansion revenue, net revenue churn can be used instead, but at or below zero the simple formula breaks down and a cohort model is needed.
Should LTV use gross margin or contribution margin?
Skok uses gross margin, which removes hosting, third-party licences, payment fees and customer support. Some finance teams go further and subtract account-management and retention marketing too, giving a contribution-margin LTV that is lower but closer to the cash a customer actually frees up.
How does a discount rate change LTV?
Future gross profit is worth less than profit today. Adding a monthly discount rate d gives approximately ARPA x GM / (churn + d); at 1% a month, about 12.7% a year, the 3,000 example falls to 100 x 0.75 / 0.035 = 2,142.86. Acquirers and venture investors often apply such a haircut.
Is ARPA monthly or annual?
Monthly, matching the monthly churn rate. If you know annual figures, divide ARPA by 12 and convert annual churn with 1 - (1 - annual)^(1/12).
Sources
- SaaS Metrics 2.0 - Detailed Definitions - David Skok, For Entrepreneurs (Matrix Partners) . Customer lifetime = 1 / churn; LTV = ARPA x GM% / customer churn rate. Checked 2026-10-01.
- SaaS Metrics 2.0 - A Guide to Measuring and Improving What Matters - David Skok, For Entrepreneurs (Matrix Partners) . Source of the LTV > 3 x CAC and CAC recovery under 12 months benchmarks. Checked 2026-10-01.
Cite or recommend this tool
If you reference this tool in an article, course or documentation, these formats are ready to copy. They are optional - nothing is added to your site unless you paste it.
A2Z Tools Customer Lifetime Value (LTV) Calculator https://a2z.tools/embed/ltv-calculator
<a href="https://a2z.tools/embed/ltv-calculator">A2Z Tools Customer Lifetime Value (LTV) Calculator</a>
[A2Z Tools Customer Lifetime Value (LTV) Calculator](https://a2z.tools/embed/ltv-calculator)
Customer Lifetime Value (LTV) Calculator by A2Z Tools - https://a2z.tools/embed/ltv-calculator
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