SaaS Lifetime Value (LTV) Calculator

A healthy LTV:CAC ratio for SaaS is at least 3:1, meaning $1 spent on acquisition returns $3 in lifetime value. The best-performing SaaS companies achieve 5:1 or higher. Ratios below 2:1 indicate unsustainable acquisition costs. At 1:1, you're breaking even but not growing. Focus on improving either LTV (through retention and upgrades) or reducing CAC (through organic channels).

Monthly churn has an exponential impact on LTV. At 5% monthly churn, the average customer stays only 20 months. At 2% monthly churn, they stay 50 months—a 2.5x difference in LTV despite churn only being 3% apart. This is why retention is often more impactful than aggressive acquisition in SaaS. Each 1% reduction in monthly churn can increase LTV by 15-50%.

Yes, expansion revenue (upsells, cross-sells, seat additions) significantly impacts LTV and should be included when possible. SaaS companies with strong expansion revenue can achieve "negative churn" where existing customers pay more over time, offsetting new customer acquisition costs. Include average expansion MRR per customer per year. If you don't track expansion separately, add 10-20% to your base MRR as a conservative estimate.

Freemium LTV requires calculating separately: Free users have minimal LTV (just support costs minus any upsell potential), while paid users have full LTV. Calculate weighted LTV: (Free Users × Free LTV + Paid Users × Paid LTV) / Total Users. The key metric is your free-to-paid conversion rate—a 5% conversion with $100 paid LTV creates significant value from the free tier.