1. The two formulas that matter
LTV tells you how much one customer pays you over their lifetime. Valuation per customertells you what an acquirer implicitly pays for each logo on your roster.
2. Worked LTV example
- ARPU = $80 / month
- Monthly churn = 4%
- Customer lifetime = 1 / 0.04 = 25 months
- LTV = $80 × 25 = $2,000
Cut churn to 2% and lifetime doubles to 50 months. LTV doubles to $4,000 — without acquiring a single new customer.
3. ARPU is the underrated lever
Average Revenue Per User is the fastest lever you can move. A 10% ARPU lift usually beats a 10% customer lift, because pricing flows through to valuation untouched by acquisition cost. Annual plans, usage tiers, and a clearly priced premium offering all compound here.
4. Churn quietly destroys value
Halving monthly churn doubles lifetime, doubles LTV, and nudges your valuation multiple. It compounds every month forever. There is no other lever in SaaS with this much leverage.
5. The LTV/CAC ratio
If you spend $400 to acquire a $2,000 LTV customer, your LTV/CAC is 5 — strong. Below 3 means you're either underpriced, overpaying for acquisition, or both. The calculator shows the ratio so you can see it at a glance.
6. Using the customer value calculator
Enter today's customer count, ARPU, and monthly churn rate. Then move one variable at a time. Whichever change lifts valuation the most is your work for next quarter.
Frequently asked questions
What is LTV in SaaS?
LTV (Lifetime Value) is the total revenue a single customer is expected to generate over their entire lifetime with your product. For subscription SaaS, LTV = ARPU ÷ monthly churn.
What is a good LTV/CAC ratio?
3:1 or higher is considered healthy. Below 1:1 means you're losing money on every customer; above 5:1 may mean you're under-investing in growth.
Is LTV the same as valuation per customer?
No. LTV is what one customer pays you. Valuation per customer is what an acquirer pays per logo at exit — typically much higher because it bakes in growth potential.