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Series A Customer Lifetime Value Estimator

This Series A Customer Lifetime Value Estimator projects gross profit generated by an average customer before churn. It supports pricing, acquisition-budget, and segmentation decisions for recurring-revenue businesses.

The calculator uses average revenue per account, gross margin, and monthly churn. It also compares lifetime value with CAC and estimates the gross-profit payback period. Because retention and margin can change by cohort, use segment-specific inputs whenever possible.

Inputs

USD
%
%
USD
Result
—
Estimated customer lifetime value
Expected lifetime—
Gross profit per month—
LTV:CAC ratio—
CAC payback—

1. Enter monthly revenue
Use average recurring revenue per customer for a consistent segment.

2. Set gross margin
Enter the portion of revenue remaining after direct service costs.

3. Enter monthly churn
Use customer churn as a percentage of the opening customer base.

4. Add CAC
Enter the acquisition cost for the same customer segment.

5. Review value and payback
Compare LTV with CAC and the estimated gross-profit payback period.

Expected lifetime (months) = 1 / Monthly churn rate Monthly gross profit = ARPA × Gross margin LTV = Monthly gross profit / Monthly churn rate LTV:CAC = LTV / CAC

Percentages are converted to decimals. The model assumes constant churn, revenue, and gross margin and does not discount future cash flows.

What the result means

Estimated LTV is the gross profit expected from an average customer under a constant-churn model.

A cohort model may be more appropriate when expansion, contraction, or retention changes materially over time.

Given

  • $500 monthly revenue per customer
  • 80% gross margin
  • 2.5% monthly churn
  • $3,000 CAC

Calculation

Monthly gross profit = $500 × 0.80 = $400. LTV = $400 / 0.025 = $16,000. LTV:CAC = $16,000 / $3,000 = 5.33x.

Result

Estimated LTV = $16,000.

The model implies roughly 40 months of expected life and a 7.5-month gross-profit payback.

Why use gross margin instead of revenue?

Gross margin removes direct delivery costs, giving a closer estimate of customer economics than revenue alone.

Can revenue expansion be included?

Not directly in this constant-ARPA model. Use a cohort or net revenue retention model when expansion is significant.

What happens when churn is very low?

The estimated lifetime and LTV rise sharply. Small measurement errors in churn can therefore produce large differences.

Should annual churn be entered?

No. Enter a monthly churn rate because the formula uses monthly revenue and produces lifetime in months.

Is LTV:CAC enough to approve spending?

No. Also review payback timing, cash constraints, retention quality, and channel scalability.