Should I use logo churn or revenue churn?

Revenue churn is more accurate when plans vary in price, and it can be negative when expansion outpaces losses.

Why include gross margin?

Revenue is not profit. Hosting, support and payment fees mean margin-adjusted LTV is the figure to plan acquisition spend against.

Does this work for annual contracts?

Yes — convert annual churn to a monthly equivalent and enter ARPA as monthly revenue.

How do I calculate SaaS LTV?

Multiply average revenue per account by gross margin, then divide by monthly churn rate. Use gross profit rather than revenue, or the result will overstate lifetime value.

What is a good LTV to CAC ratio?

3:1 is the widely used target. Below 1:1 each sale loses money; above 5:1 usually means you could profitably spend more on acquisition.

What is a good monthly churn rate?

Roughly 3–5% for self-serve SMB products, 1–2% for mid-market, and under 1% for enterprise. Remember that 5% monthly compounds to 46% annually.

What is the difference between gross and net revenue churn?

Gross churn counts only revenue lost. Net churn subtracts expansion revenue from existing customers, so it can be negative when upgrades outweigh cancellations.

How do I calculate CAC payback period?

Divide customer acquisition cost by monthly gross profit per customer. At 1,200 CAC and 160 monthly gross profit, payback is 7.5 months.

Why does my LTV look unrealistically high?

Almost always because churn is very low in a young cohort or because revenue was used instead of gross profit. Cap the lifespan at 36 months when churn is under 1% to keep the figure defensible.

Business & Ops

Boost Your SaaS Growth with Our Free Churn & LTV Calculator

LTV, average lifetime and LTV:CAC from MRR and churn.

Enter your monthly recurring revenue, churn rate and gross margin, and this calculator returns customer lifetime value, average customer lifespan, the LTV:CAC ratio and your CAC payback period. The headline rule: LTV should be at least three times CAC, and payback should land inside 12 months for a healthy SaaS business.

Average revenue per account ($ / month)

Monthly churn rate (%)

Gross margin (%)

Customer acquisition cost ($)

Lifetime value

$3,200

Avg lifetime

33.3 mo

LTV : CAC

5.33x

CAC payback

6.3 mo

LTV = ARPA × margin × (1 ÷ monthly churn). Aim for an LTV:CAC of 3x or better.

SaaS Retention Checklist by Churn Band

Benchmarks by segment, then the interventions that match your actual churn number.

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About this tool

Lifetime value tells you how much you can afford to spend acquiring a customer. Enter average revenue per account, monthly churn rate, gross margin and optional CAC to get LTV, expected lifetime and your LTV to CAC ratio.

How to calculate LTV

Average customer lifetime in months is 1 divided by your monthly churn rate. LTV is ARPA times gross margin times that lifetime. A 3 percent monthly churn implies roughly 33 months of expected lifetime.

What LTV to CAC ratio to aim for

Three to one is the widely used benchmark. Below that, acquisition is eating your margin; far above it, you are probably underinvesting in growth.

How LTV is actually calculated

The standard formula is LTV = (ARPA × gross margin %) ÷ monthly churn rate. Average revenue per account times your gross margin gives the monthly gross profit per customer; dividing by churn gives lifetime value, because 1 ÷ churn is the average customer lifespan in months. At 200 ARPA, 80% gross margin and 3% monthly churn: (200 × 0.8) ÷ 0.03 = 5,333 LTV, over an average lifespan of 33 months. Two mistakes make this number fiction: using revenue instead of gross profit (which inflates LTV by whatever your cost of service is), and using logo churn where revenue churn is more accurate for a business with expansion.

Logo churn, revenue churn and net revenue retention

Logo churn counts customers lost. Gross revenue churn counts revenue lost from cancellations and downgrades. Net revenue churn subtracts expansion revenue from upgrades and seat growth, and it is the number investors ask about. A business can lose 3% of customers every month and still grow revenue from the same cohort if the remaining customers expand faster — that is negative net churn, and it is what net revenue retention above 100% means. Best-in-class B2B SaaS sits at 120%+ NRR; below 100% you are refilling a leaking bucket with every new sale.

Benchmarks worth measuring against

Monthly churn of 3–5% is normal for self-serve SMB products, 1–2% for mid-market, and under 1% for enterprise with annual contracts. Annualised, 5% monthly churn is a brutal 46% of customers gone per year. LTV:CAC below 1 means every sale destroys value; between 1 and 3 means growth is unprofitable; 3 to 5 is the healthy band; above 5 usually means you are underinvesting in acquisition and leaving growth on the table. CAC payback under 12 months is good for SMB, under 18 months acceptable for enterprise.

Where the leak usually is

Most churn is decided in the first 30 days. Cohort your churn by signup month and by activation status, and you will typically find that customers who reached the product's core action in week one churn at a fraction of the rate of those who did not. Involuntary churn — expired cards and failed payments — is commonly 20–40% of total churn and is the cheapest to fix with dunning emails, card-expiry warnings and automatic retries. Fix that before running a single retention campaign.

Using LTV to set an acquisition budget

Once LTV is credible, your maximum sustainable CAC is LTV ÷ 3. Work that back into channel budgets: if LTV is 5,333, you can spend up to about 1,780 to acquire a customer, and a paid channel converting at 2% from a 3 click can absorb that comfortably. Recheck quarterly — LTV moves whenever pricing, margin or churn moves, and an acquisition budget built on last year's churn rate is how a growth plan quietly turns unprofitable.

Monthly churn to average customer lifespan

Monthly churn	Annual churn	Average lifespan	LTV multiple of monthly gross profit
0.5%	5.8%	200 months	200×
1%	11.4%	100 months	100×
2%	21.5%	50 months	50×
3%	30.6%	33 months	33×
5%	46.0%	20 months	20×
7%	58.2%	14 months	14×
10%	71.8%	10 months	10×

SaaS health benchmarks

Metric	Concerning	Healthy	Excellent
Monthly logo churn (SMB)	over 5%	3–5%	under 2%
Net revenue retention	under 90%	100–110%	over 120%
LTV : CAC	under 1:1	3:1	4–5:1
CAC payback	over 24 months	12–18 months	under 12 months
Gross margin	under 60%	70–80%	over 80%

How to use SaaS Churn & LTV Calculator

1
Enter ARPU
Average revenue per account per month, net of discounts.
2
Enter churn
Monthly percentage of customers (or revenue) lost. Divide annual churn carefully — it does not scale linearly.
3
Add margin and CAC
Gross margin and blended acquisition cost turn the output into a decision, not trivia.
4
Read the ratios
Use lifetime, LTV and LTV:CAC together to decide whether to spend more on acquisition or on retention.

Example input

ARPU $80 · 3% monthly churn · 80% margin · CAC $600

Expected output

Lifetime ≈ 33 months · LTV ≈ $2,133 · LTV:CAC ≈ 3.6:1

Best practices

Measure churn on a consistent cohort basis — blending monthly and annual plans into one rate produces a number you cannot act on.
Track revenue churn alongside logo churn; losing ten small accounts is not the same as losing one enterprise contract.
Use gross margin, not revenue, in the LTV numerator so the ratio reflects money you actually keep.
Aim for LTV:CAC of 3:1 or better and a CAC payback under 12 months for SMB, under 18 for enterprise.
Recompute quarterly — LTV built on a churn rate from a year ago is a story, not a metric.

SaaS Churn & LTV Calculator — Why it matters

Churn compounds: a 5% monthly loss caps your customer lifetime at 20 months no matter how good acquisition gets.

Investors and boards evaluate SaaS on retention economics first — getting these numbers right changes both strategy and valuation.

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