How Do I Calculate Customer Lifetime Value (LTV)?

Direct Answer

Customer Lifetime Value is the total gross profit you expect from a customer across the entire relationship. The formula is LTV = (Average Revenue Per Account × Gross Margin %) ÷ Customer Churn Rate, where churn is expressed as a monthly or annual decimal. As a worked example, if your average account pays $1,000/mo, your gross margin is 80%, and monthly churn is 2% (0.02), then LTV = ($1,000 × 0.80) ÷ 0.02 = $800 ÷ 0.02 = $40,000 per customer.

The 1 ÷ churn term is the expected lifetime in months — here 1 ÷ 0.02 = 50 months. Always use gross-margin-adjusted revenue, not raw revenue, or you will overstate LTV and chase unprofitable accounts. A healthy 2027 SaaS benchmark is an LTV:CAC ratio of at least 3:1, with elite companies hitting 4:1 to 5:1.

PULSE has a free [gross profit calculator](/tools/gross-profit-calculator) that nails the margin input this formula depends on.

The Top 10 Tools to Calculate Customer Lifetime Value

These tools compute LTV directly or supply the revenue, margin, and churn inputs it needs. Pricing is per user per month unless noted, billed annually.

1. ChartMogul 🏆 BEST OVERALL

ChartMogul is purpose-built for subscription unit economics and treats LTV as a core metric, computing it from your billing data and churn automatically. It connects to Stripe, Recurly, Chargebee, and others, then segments LTV by plan, cohort, and geography.

Pricing starts free under $10K monthly revenue, then scales roughly $100–$500+/mo by revenue tier. Its cohort and retention views show how LTV shifts as you reduce churn.

It ranks first because LTV, churn, and the LTV:CAC ratio are native, accurate, and segmentable without any spreadsheet work. It fits any SaaS team serious about unit economics.

2. Baremetrics

Baremetrics reads Stripe and similar billing systems to display LTV, MRR, churn, and ARPA out of the box. You see LTV trends and can break them down by customer attributes.

Plans run about $108/mo (Metrics) to $468/mo+ for larger revenue. The forecasting add-on projects LTV forward under different churn scenarios.

It is best for early- and growth-stage SaaS teams that want metrics live within minutes of connecting billing.

3. ProfitWell (Paddle) 💎 BEST VALUE

ProfitWell Metrics computes LTV, churn, and ARPA for free when connected to your billing platform. The math is accurate and the dashboards rival paid tools.

Because the analytics product costs nothing and reports LTV reliably, it is the strongest value of any tool here. Paddle earns revenue on billing and payments, not the metrics layer.

It is the value pick for any subscription business that wants real LTV math at zero cost.

4. HubSpot

HubSpot can compute LTV inside its CRM when deal revenue and churn data live there, and it ties LTV to acquisition source for LTV:CAC analysis. Custom report builders divide margin-adjusted revenue by churn.

Pricing runs $15/user/mo (Starter), $90/user/mo (Professional), and about $150/user/mo (Enterprise). Lifecycle and revenue reporting connect LTV to the full funnel.

It fits teams that want LTV alongside the marketing and sales data that drives CAC.

5. Salesforce Sales Cloud

Salesforce tracks contract value, renewals, and churn, the raw inputs for LTV, and rolls them up across segments. With CPQ and revenue products you get accurate recurring revenue figures.

Pricing is $25/user/mo (Starter) to $330/user/mo (Unlimited), with revenue add-ons priced separately. Reports and dashboards model LTV by cohort and region.

It is best for enterprise teams that need LTV tied to detailed account and renewal data.

6. Recurly

Recurly is a subscription management and billing platform that exposes LTV, churn, and retention analytics natively because it owns the recurring billing relationship. Its data is precise since it processes the payments.

Pricing is custom, typically starting around $249/mo plus revenue-based fees. Built-in churn management directly improves the LTV denominator.

Choose it when you want billing and LTV analytics in the same system that runs your subscriptions.

7. Tableau

Tableau blends CRM, billing, and finance data into LTV models segmented any way you need. It does not own the data but visualizes LTV powerfully across dimensions.

Pricing is $15/user/mo (Viewer), $42/user/mo (Explorer), and $75/user/mo (Creator), billed annually. Creators build the LTV calculation for the rest of the org to consume.

Pick it when LTV must be sliced finely for analytics and finance teams.

8. Power BI

Power BI builds LTV dashboards cheaply from Dynamics, Salesforce, and Excel, ideal for Microsoft-stack companies. DAX measures handle the margin-and-churn math.

Pricing is $14/user/mo (Pro) and $24/user/mo (Premium per user). The cost-to-power ratio is hard to beat for finance teams.

It fits RevOps and finance teams already in the Microsoft ecosystem.

9. Mixpanel

Mixpanel tracks product engagement and retention, the leading indicators of churn that drive LTV. Pair its retention curves with revenue to model how engagement lifts LTV.

It offers a free plan to 1M events, then $28/mo (Growth) and custom Enterprise pricing. Cohort retention reports show LTV-relevant survival rates.

Choose it for product-led teams where engagement predicts churn and lifetime.

10. Klipfolio

Klipfolio displays LTV alongside CAC, payback, and churn on shared dashboards built from CRM and billing data. It is a KPI scoreboard rather than an analysis engine.

Pricing runs about $90/mo (Go) to $300/mo+ (Pro). SaaS metric templates include LTV and LTV:CAC.

It suits teams that want a visible, shared LTV scoreboard without a BI deployment.

A Fully Worked LTV Example

Make the inputs concrete. Suppose your average account pays $1,200/mo ($14,400 ARR), your gross margin is 80% after hosting, support, and payment fees, and your monthly logo churn is 2.5% (0.025). Margin-adjusted monthly revenue is $1,200 × 0.80 = $960.

Expected lifetime is 1 ÷ 0.025 = 40 months. LTV is $960 × 40 = $38,400. If your CAC for these accounts is $9,600, your LTV:CAC is $38,400 ÷ $9,600 = 4:1, and your CAC payback in margin terms is $9,600 ÷ $960 = 10 months — both comfortably healthy.

Now show the churn lever. Cut monthly churn from 2.5% to 1.8% through better onboarding and the lifetime jumps to 1 ÷ 0.018 = 55.5 months, lifting LTV to $960 × 55.5 = $53,280 — a 39% gain with no price increase and no change to acquisition. This is why retention investment so often beats discounting: because lifetime is the reciprocal of churn, small improvements compound into large LTV gains.

Common LTV Mistakes to Avoid

• Using raw revenue instead of gross margin. Multiplying ARPA by gross margin is mandatory; skipping it overstates LTV by 20–40% and justifies overspending on acquisition.
• Applying a single blended churn rate. SMB and enterprise cohorts churn at very different rates. A blended figure hides that your low-end segment may be unprofitable while your enterprise base subsidizes it.
• Including expansion incorrectly. If you fold expansion revenue into ARPA, pair it with net (not gross) churn, or you double-count growth. Mixing gross churn with expanded ARPA inflates LTV.
• Treating early-cohort LTV as permanent. LTV is a projection from current churn. If churn is rising, your modeled LTV is already stale; recompute on trailing cohorts.
• Forgetting discounting for long lifetimes. Revenue 40 months out is worth less than revenue today. Sophisticated teams apply a discount rate, which trims LTV modestly but makes LTV:CAC honest.

How to Choose

• Pick a billing-native tool (ChartMogul, Baremetrics, ProfitWell, Recurly) for subscriptions so LTV and churn compute automatically and accurately.
• Pick your CRM (HubSpot, Salesforce) when you need LTV tied to acquisition source for LTV:CAC analysis.
• Pick a BI tool (Tableau, Power BI) when LTV must be segmented across cohort, plan, and geography for finance.
• Always use gross-margin-adjusted revenue, not raw revenue, so the LTV reflects real profit.
• Track LTV and churn together — reducing churn is the fastest lever on LTV because lifetime is 1 ÷ churn.

How to Track LTV Over Time

LTV is a projection, so it drifts as churn, pricing, and margin change. Recompute it monthly and watch the trend rather than the snapshot. Track it by cohort: the customers you signed in Q1 should show a different and ideally improving LTV than those from a year earlier, which tells you whether onboarding, pricing, and product changes are working.

Segment LTV by acquisition channel and plan tier, because a channel that brings cheap customers with high churn can drag down a blended LTV that looks fine in aggregate. Pair every LTV reading with the matching CAC for that segment so the LTV:CAC ratio stays honest, and flag any cohort where the ratio dips below 3:1.

When margin shifts — a new hosting contract, a support cost increase, a price change — rerun LTV immediately, since the margin term flows directly into the result. Boards usually want a trailing-twelve-month blended LTV plus the two or three most important segment cuts, while operators want the live cohort view that exposes problems early enough to fix them.

As a concrete cadence, a growth-stage SaaS team might review LTV monthly in the RevOps meeting, refresh cohort retention quarterly when fresh cohorts mature, and re-run the full LTV:CAC model whenever margin or pricing changes. The point of tracking is not the number itself but the decision it drives: a segment whose LTV:CAC has fallen from 4:1 to 2:1 over three quarters is telling you to either cut acquisition spend there or fix retention before the unit economics turn negative, and only consistent month-over-month measurement surfaces that signal in time to act.

FAQ

Should I use revenue or gross margin in LTV? Use gross-margin-adjusted revenue. Multiplying ARPA by gross margin gives you the actual profit per customer; using raw revenue inflates LTV and leads to overspending on acquisition.

How does churn affect LTV? LTV is inversely proportional to churn because expected lifetime equals 1 ÷ churn rate. Cutting monthly churn from 3% to 2% raises lifetime from about 33 months to 50 months — a 50% LTV increase with no price change.

What is a healthy LTV:CAC ratio in 2027? Aim for 3:1 or higher. Below 3:1 you are spending too much to acquire customers; far above 5:1 may signal you are underinvesting in growth.

Should I calculate LTV at the cohort or account level? Use cohorts for strategy and account level for sales prioritization. Cohort LTV shows whether retention and pricing are improving over time, while account-level LTV guides which customers to expand.

Bottom Line

Calculate LTV by multiplying margin-adjusted ARPA by gross margin and dividing by churn, then compare it to CAC. ChartMogul is the Best Overall for native, segmentable LTV, and ProfitWell (Paddle) is the Best Value at free for accurate subscription LTV. Drive churn down and LTV rises fastest, because lifetime is the reciprocal of churn.

Sources

• ChartMogul LTV and unit economics documentation (chartmogul.com)
• Baremetrics and ProfitWell/Paddle metrics product pages (baremetrics.com, paddle.com)
• HubSpot and Salesforce pricing pages
• Recurly subscription analytics documentation (recurly.com)
• Tableau, Power BI, and Mixpanel pricing pages
• David Skok / SaaStr writing on LTV and LTV:CAC ratios
• Bessemer and OpenView SaaS benchmark reports