Customer LTV: $50 ARPA, 90% Margin, 10% Churn
A consumer SaaS tool with $50 ARPA, 90% margin, and 10% monthly churn has a customer LTV of only $450.
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.
High churn destroys customer lifetime value even for high-margin businesses — this scenario highlights why retention is the most powerful lever for LTV improvement.
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.