Unit Economics

MaEcSaMpFtTt+6

Customer Lifetime Value (LTV)

Q: What is LTV?

LTV (Customer Lifetime Value) is the total revenue or profit expected from a single customer over their entire relationship with your business. For subscriptions, it equals ARPU divided by monthly churn rate. It's the foundation of unit economics.

Q: What is a good LTV for SaaS?

LTV varies by segment: consumer apps target $50-200, SMB SaaS targets $1K-3K, mid-market targets $10K-25K, and enterprise targets $50K+. The absolute number matters less than the LTV/CAC ratio — aim for 3:1 or higher.

Q: How do I increase LTV?

Three levers: reduce churn (extends customer lifetime), increase ARPU (through upsells, price increases, or usage growth), and improve retention quality (through better onboarding and product experience). Churn reduction is usually the highest-leverage starting point.

Q: Should I use revenue LTV or gross profit LTV?

Gross profit LTV is more accurate for decision-making because it accounts for the cost of serving each customer. Revenue LTV overstates the value if margins vary by segment. Use revenue LTV for benchmarking comparisons since it's the industry standard.

Customer Lifetime Value, or LTV, is the total revenue expected from a customer over their entire relationship. For subscriptions, LTV equals ARPU divided by monthly churn rate. SMB SaaS typically targets LTV of $1,000 to $3,000. The LTV to CAC ratio should be 3 to 1 or higher for sustainable growth.

Why LTV Matters

LTV defines how much you can afford to spend acquiring a customer. A business with $500 LTV can sustainably spend up to ~$167 on acquisition (at a 3:1 LTV/CAC ratio). A business with $5,000 LTV can spend $1,667. This 10x difference in allowable CAC means the high-LTV business can access expensive channels (enterprise sales, conferences, outbound) that the low-LTV business cannot. LTV also compounds with retention improvements — reducing churn by 2 percentage points can increase LTV by 50-100%.

How to Calculate LTV

For subscription businesses: ARPU ÷ Monthly Churn Rate. For e-commerce: AOV × Average Purchase Frequency × Average Customer Lifespan. For more precision, use cohort-based LTV analysis that tracks actual revenue over time rather than relying on averages.

LTV Formula

LTV = ARPU ÷ Monthly Churn Rate (subscription) or AOV × Frequency × Lifespan (e-commerce)

LTV Calculator

Calculate Your LTV

Enter your numbers to calculate ltv instantly.

Monthly ARPU

Monthly Churn Rate

Customer Lifetime Value

$1,225

Want to model this over 36 months with scenarios? Try Revenue Map free →

Industry Benchmarks

Segment	Good	Average	Poor
Consumer App	>$200	$50–$200	<$50
SMB SaaS	>$3,000	$1K–$3K	<$1K
Mid-market SaaS	>$25,000	$10K–$25K	<$10K
Enterprise SaaS	>$100,000	$50K–$100K	<$50K

Expert Tips

Use cohort-based LTV, not formula-based LTV, for strategic decisions. Formula LTV (ARPU/churn) assumes constant churn, which is rarely true — early churn is higher than mature churn.

Track LTV by acquisition channel. Organic customers typically have 2-3x higher LTV than paid acquisition customers. This changes your blended economics significantly.

LTV should be calculated on a gross margin basis for accuracy. Revenue-based LTV overstates the value if your margins are thin.

Set a maximum allowable CAC at LTV/3. This ensures you have room for operational costs and profit between the cost of acquisition and the value of the customer.

Frequently Asked Questions

What is LTV?

LTV (Customer Lifetime Value) is the total revenue or profit expected from a single customer over their entire relationship with your business. For subscriptions, it equals ARPU divided by monthly churn rate. It's the foundation of unit economics.

What is a good LTV for SaaS?

LTV varies by segment: consumer apps target $50-200, SMB SaaS targets $1K-3K, mid-market targets $10K-25K, and enterprise targets $50K+. The absolute number matters less than the LTV/CAC ratio — aim for 3:1 or higher.

How do I increase LTV?

Three levers: reduce churn (extends customer lifetime), increase ARPU (through upsells, price increases, or usage growth), and improve retention quality (through better onboarding and product experience). Churn reduction is usually the highest-leverage starting point.

Should I use revenue LTV or gross profit LTV?

Gross profit LTV is more accurate for decision-making because it accounts for the cost of serving each customer. Revenue LTV overstates the value if margins vary by segment. Use revenue LTV for benchmarking comparisons since it's the industry standard.

Related Metrics

Unit Economics

LTV/CAC

The LTV/CAC ratio compares customer lifetime value to customer acquisition cost....

Acquisition

CAC

Customer Acquisition Cost is the total cost of acquiring a new paying customer, ...

Retention & Churn

Churn Rate

Churn rate measures the percentage of customers or revenue lost over a given per...

Revenue

ARPU

ARPU measures the average monthly revenue generated per active user or subscribe...

Unit Economics

CAC Payback

CAC Payback Period is the number of months required to recover the cost of acqui...

Business Models Using LTV

LTV is a key metric for these business types. Click any model to see how Revenue Map calculates it automatically.

Track LTV automatically

Revenue Map calculates ltv, benchmarks it against your industry, and projects it over 36 months — in under 5 minutes.

Build My Model — Free