The SaaS Customer Lifetime Value Estimator calculates a simple gross-margin LTV from average monthly revenue per account, gross margin, and monthly customer churn. It first estimates expected customer lifetime as the inverse of churn, then multiplies that lifetime by monthly gross profit per account. The result helps teams compare customer economics across plans, channels, or segments.
This is a steady-state approximation. It does not model cohort-specific retention curves, expansion revenue, discounting, or changing margins over time. Very low churn can also make the inverse-churn method highly sensitive to small measurement errors. Use a consistent churn definition and a sufficiently long observation period, then compare the estimate with cohort-based realized gross profit when enough history is available.
Use recurring revenue for the same customer segment as the churn rate.
Use revenue less direct service and support delivery costs.
Use customer-count churn, not revenue churn, for this model.
The inverse-churn approximation is shown in months.
Compare gross-margin LTV with acquisition cost and payback expectations.
Where:
Assumptions: Churn and gross margin remain constant, expansion revenue is not modeled, and the simple inverse-churn approximation is appropriate for the selected customer segment.
The main result is an estimate based on the values entered and should be interpreted together with the supporting metrics shown.
Use consistent periods and units, and replace planning assumptions with observed data when available.
Given:
Calculation:
Monthly gross profit = $120 × 82% = $98.40. Expected lifetime = 1 ÷ 0.025 = 40 months. LTV = $98.40 × 40 = $3,936.
Result: Estimated customer LTV is $3,936.
Under constant churn and margin assumptions, an average account contributes about $3,936 of gross profit over its expected lifetime.
This formula uses customer-count churn. Revenue churn can produce a different lifetime interpretation, especially when account sizes vary.
Gross margin removes direct delivery costs, making LTV more comparable with acquisition spending and contribution economics.
No. Net revenue retention above 100% can increase realized value, but it requires a different cohort or revenue-based model.
Estimated lifetime becomes very large and sensitive to small input changes. Validate low churn over a long period before relying on the result.
Compare the two using the same customer segment and time basis. Also review cash payback because a strong LTV-to-CAC ratio can still require substantial upfront funding.