Tiny Toolkit

LTV Calculator

Calculate customer lifetime value using ARPU and churn rate, and see your LTV:CAC ratio.

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Frequently Asked Questions

What is customer lifetime value (LTV)?
LTV is the total revenue a business expects to earn from a single customer over the entire duration of the relationship. It is used to determine how much you can afford to spend acquiring a customer (CAC) while remaining profitable.
What is the simple LTV formula?
For subscription businesses: LTV = Monthly ARPU / Monthly Churn Rate. For example, with $79 ARPU and 3% monthly churn: LTV = $79 / 0.03 = approximately $2,633. This assumes constant ARPU and a constant churn probability each month.
What is a good LTV:CAC ratio?
The benchmark for a healthy SaaS business is 3:1 or higher (LTV at least three times CAC). Below 3:1 usually means the business is spending too much to acquire customers relative to what they generate. Above 5:1 may indicate underinvestment in growth.
What is the payback period and why does it matter?
Payback period = CAC / Monthly ARPU. It shows how many months of revenue are needed to recoup the cost of acquiring a customer. Shorter payback periods (under 12 months) mean faster cash recovery and less dependence on outside capital for growth.

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