Customer LTV: $2,000 ARPA, 60% Margin, 0.5% Churn
A large enterprise contract at $2,000 monthly ARPA with 60% gross margin and only 0.5% monthly churn produces an exceptional LTV of $240,000.
How to use this tool
- Enter the average revenue one customer generates per period.
- Enter your gross margin (or 100% for a revenue-based LTV).
- Enter your churn rate per period, in the same time unit as the revenue.
- Read the lifetime value, average lifespan, and gross margin per period.
Enterprise contracts with near-zero churn and high ARPA create the most valuable customers — this LTV justifies CAC of $80,000 or more under a 3:1 benchmark.
Frequently asked questions
- Why divide by churn rate?
- The average customer lifespan is approximately the reciprocal of the churn rate. A 5% periodic churn means a customer stays about 1 ÷ 0.05 = 20 periods on average, so multiplying periodic margin by that lifespan gives lifetime value.
- Should I use revenue or gross margin?
- Gross-margin LTV is the more defensible number because it reflects profit you keep after serving the customer. Use revenue (100% margin) only when you specifically want a revenue-based figure, and keep comparisons consistent.
- Does this account for discounting?
- No. This is the simple, undiscounted LTV. For long-lived, high-value customers you may want to discount future periods to present value, which produces a lower, more conservative LTV.