Estimate the profit a customer earns over their lifetime.
Monthly churn implies an average lifespan, and multiplying the profitable part of monthly revenue by that lifespan yields the customer's lifetime value. LTV is the fair ceiling for what you can pay to acquire a customer, and comparing it to CAC decides whether marketing widens or narrows the moat.
Customer Lifetime Value
LTV = ARPU x gross margin% / monthly churn%
LTV = ARPU x gross margin% / monthly churn% Monthly churn implies an average lifespan, and multiplying the profitable part of monthly revenue by that lifespan yields the customer's lifetime value.
LTV is the fair ceiling for what you can pay to acquire a customer, and comparing it to CAC decides whether marketing widens or narrows the moat.
This calculator takes 3 inputs: Average revenue per month, Gross margin, Monthly churn rate. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.