CLTV Calculator (Customer Lifetime Value)
Track the financial value of customer loyalty with our CLTV calculator. Gain insights into your ARPU/ARPA, SaaS LTV, CAC, CAC Payback, and LTV/CAC ratios.
The formulas below will automatically calculate all indicators based on available inputs
Please note that we indicate benchmarks accordingly to the business size, and compare your results using color scales:The average income a company generates from each user or account in a year
The predicted total revenue a company expects to earn from a customer throughout their entire relationship
The cost a company incurs to acquire a new customer, including marketing and sales expenses.
CAC Payback = CAC/ (ARR / 12 * gross profit margin)
Measures the number of months it takes for a company to recoup its investment in acquiring a new customer
Company is facing challenges in acquiring customers cost-effectively or retaining them over the long term
Customer acquisition and retention strategies are moderately effective, but there may be room for improvement in optimizing costs and maximizing customer lifetime value
Company efficiently acquires customers at a reasonable cost, resulting in a good return on investment over the customer's lifetime
Measures the relative value of a customer over their lifetime compared to the cost of acquiring that customer
Company is facing challenges in acquiring customers cost-effectively or retaining them over the long term
Customer acquisition and retention strategies are moderately effective, but there may be room for improvement in optimizing costs and maximizing customer lifetime value
Company efficiently acquires customers at a reasonable cost, resulting in a good return on investment over the customer's lifetime
Why use our CLTV calculator?
We know how busy founders can be, especially if we’re talking about first-time founders, and how hard it is to memorize all the information on how to grow your business effectively. However, with our CLTV calculator, your life will become easier. It can help you understand your customers’ lifetime value and make informed decisions based on the results. In short, you can use the insights from our CLTV calculator to optimize your strategies for growth, retention, and profitability.
Now let\'s have a closer look at what exactly our customer LTV calculator gives:
- The Average Revenue Per Account (ARPA)—a SaaS ratio that shows how much money each customer or account generates over a certain time (in our case, yearly).
- The Lifetime Value (LTV) model calculates all the money you expect to earn from a customer over the time they remain your customer.
- The Customer Acquisition Cost (CAC) shows the amount of money you spend to get a new customer.
- The CAC Payback measures the time it takes you to recoup your investment in getting a new customer.
- The LTV/CAC ratio shows if your customer acquisition efforts work well in the long run or you need to make improvements.
CAC and lifetime value calculation will help you spot the strong and weak areas in your S&M strategies and adjust them, if necessary. Additionally, our CLTV calculator offers benchmarks that let you compare your company’s performance against industry averages to check your company\'s current position.
What is CLTV?
CLTV, meaning Customer Lifetime Value, is the average income a business expects from a customer for their entire relationship with the company. The average customer lifespan consists of an initial purchase, repeat purchases, subscription renewals (if applicable), and ongoing engagement—the total time a customer uses your services/products.
In SaaS, customer lifetime value calculation helps you see how well your product/service resonates with the audience and determines the average value your customers bring you. Given this information, you can check if your company will stand in the long run and if there are areas you need to fix.
What\'s the difference between CLV vs. LTV vs. CLTV?
There\'s no significant difference between "CLV" vs. "LTV" vs. “CLTV”. CLTV stands for Customer Lifetime Value, and CLV means exactly the same. LTV is Lifetime Value, just without a “customer” at the front. As you see, all three abbreviations typically mean the same—the average lifetime revenue from a customer. That’s why companies can use these terms interchangeably.
How to calculate the Customer Lifetime Value?
Of course, the easiest way is to use our CLTV calculator, but if you want to calculate your CLTV on your own, here is how to do it: multiply the average revenue per account (ARPA) by the gross margin and then divide that by the churn rate.
The CLTV formula goes the following:
Beyond numbers, calculating your CLV or LTV prompts a deeper reflection on the entire customer journey. You need to consider when, where, why, for how much, and how often customers make purchases. But one step at a time. Here’s a detailed explanation of the LTV calculation in SaaS with the exact steps you must take:
To use our CLTV calculator, you don’t have to put a lot of data on the table, just your revenue, gross profit, sales & marketing expenses, total customers (start of year), new customers, and total customers (end of year). With our in-built gross margin (GM) income calculator and churn calculator, you can easily measure churn and the number of lost customers. Note that you don’t have to calculate ARPA—another key element of the lifetime value formula—it’s also done automatically.
However, if you are ready to roll up your sleeves and deal with all the LTV calculations for your SaaS business yourself, you must get ARPA, gross margin, and churn ratios first. Below, we’ve detailed how to do this.
Average Revenue Per Account (ARPA) in SaaS formula
ARPA is an acronym for Average Revenue Per Account. In SaaS, ARPA indicates the average revenue each customer account generates over a specific period. This metric helps track growth, make strategic decisions, and assess customer lifetime value for software-as-a-service businesses.
The formula to calculate ARPA for SaaS businesses:
SaaS Gross Margin formula
SaaS Gross Margin is the amount of profit remaining after subtracting the direct costs of the service, e.g., application hosting costs, new customer onboarding, customer service, and third-party software licenses.
This formula can help calculate the SaaS Gross Margin:
Churn Rate formula
Churn reflects the percentage of customers who stop subscribing or using your service within a specific period.
This formula can help calculate the Churn Rate:
Note: A "healthy" churn rate varies depending on your industry and business model. However, aiming for a monthly churn lower than 5% is generally considered good.
Additionally, to avoid a scenario of “churn and burn”, meaning that you lose your customers as rapidly as you’ve acquired them, try to build long-term relationships with your clients rather than chansing short-term gains.
How to calculate the Customer Acquisition Cost?
Customer acquisition cost (CAC) is another ratio you get using our CLTV calculator. One of the simplest ways to calculate your CAC is to divide the total cost of S&M expenses by the number of new customers acquired over a specific period (e.g., month, quarter, year).
The CAC formula is displayed:
How to calculate CAC Payback?
CAC Payback measures the number of months it takes for a company to recoup its investment in acquiring a new customer.
To calculate your CAC Payback, you need the following formula:
What is the LTV/CAC Ratio?
The formula of customer lifetime value to acquisition cost (aka LTV/CAC ratio) measures how effectively you spend your customer acquisition. In other words, you can check whether you’re generating enough lifetime revenue from the customers to recoup your acquisition costs and make a profit or not.
If this ratio is low, you\'re burning money in the long run. You’re spending more to get customers than you\'ll earn from them over time. Eventually, you’ll run out of money if you keep bringing in new customers.
The LTV/CAC formula displayed:
Industry benchmarks
Our CLTV calculator doesn’t just give you numbers—it includes industry benchmarks against which you can compare your results and see whether your business is crushing it or needs to make some extra tweaks.
What is a good LTV (customer lifetime value) for a SaaS company?
As a rule of thumb, you have to spend less to acquire a customer than the value this customer brings you—your LTV must be at least three times your CAC. Such a value equation ensures that a new customer brings in enough cash to cover the acquisition costs and generate a profit over time.
What is a good CAC Payback period?
In our CLTV calculator, the CAC Payback period is calculated in months (note that it can also be calculated quarterly or annually). The benchmarks for this metric typically vary by the company size—be it SMB, mid-market, or enterprise.
- For SMB:
Bad: 12 months and more
Good: between 6 and 12 months
Best: less than 6 months
- For mid-market:
Bad: 18 months and more
Good: between 9 and 18 months
Best: less than 9 months
- For enterprises:
Bad: 24 months and more
Good: between 12 and 24 months
Best: less than 12 months
What is a good LTV/CAC ratio?
The LTV/CAC ratio is like a health check for how well a company attracts and keeps customers. It compares what a customer is worth over time (LTV) to what it costs to get them (CAC). Here are some typical benchmarks for this ratio:
- Less than 3 is a bad sign. You overspend on customer acquisition compared to the lifetime revenue customers bring.
- Between 3 and 5 is a good ratio. You’re spending wisely and achieving a healthy profit.
- More than 5 is excellent. You’re efficiently acquiring customers at a reasonable cost, resulting in a good return on investment over the customer’s lifetime.
Is our CLTV calculator a cure-all for your SaaS business?
Not quite so. Using a CLTV calculator alone isn’t enough to get a full picture of your business. Suppose you want to achieve capital efficiency and optimize your sales and marketing strategies. You have to track other SaaS metrics and know how to build a customer acquisition model in your financial forecast. Why? Because it will help you raise funds and expand your business in the future.
If you need help with all these details, reach out to our expert team. We’re always glad to help you.