AI Customer Lifetime Value Calculator

Customer lifetime value is the total net revenue you can expect from a single customer over the entire duration of their relationship with your business. It accounts for recurring revenue, average purchase frequency, customer lifespan, and profit margins. LTV is essential for determining how much you can afford to spend acquiring customers, where to invest in retention, and how to forecast long-term revenue.

The simplest LTV formula for subscription businesses is: ARPU × Gross Margin / Monthly Churn Rate. For example, $50 ARPU × 80% margin / 5% churn = $800 LTV. More sophisticated models incorporate expansion revenue, discount rates, and cohort-based churn analysis. Our calculator uses multiple methods to give you a range of LTV estimates from conservative to optimistic based on your specific metrics.

The industry standard benchmark is a 3:1 LTV/CAC ratio, meaning each customer generates three times more value than the cost to acquire them. Ratios below 1:1 are unsustainable. Ratios between 1:1 and 3:1 indicate the business works but has thin margins for error. Ratios above 5:1 suggest potential underinvestment in growth. The ideal ratio depends on your growth stage, funding, and market opportunity size.

Churn has a dramatic, non-linear impact on LTV. Reducing monthly churn from 5% to 4% increases average customer lifespan from 20 to 25 months — a 25% improvement. Going from 4% to 3% adds another 8 months. Even small churn improvements compound into significant LTV gains. Our calculator shows exactly how each percentage point of churn reduction impacts your LTV, helping you justify retention investments.

Yes, if your business generates significant upsell, cross-sell, or upgrade revenue. Net revenue retention above 100% — meaning existing customers spend more over time — dramatically increases LTV and can even offset churn in your calculations. However, be conservative with expansion assumptions for planning purposes. Our calculator shows LTV both with and without expansion revenue so you can see the impact clearly.