Customer Lifetime Value (LTV) Calculator
Estimate customer lifetime value (LTV) from the average revenue per customer (ARPU), the gross margin and the churn rate, using a simple model.
Formulas
- LTV = ARPU × gross margin ÷ churn rate
- Average customer lifetime = 1 ÷ churn rate (in the period you chose: months for monthly, years for yearly)
- Gross profit per period = ARPU × gross margin
LTV is the gross profit per period multiplied by the average lifetime. ARPU is the average revenue per customer in that period. The churn rate is the share of the customers at the start who left during that period. The calculation uses exact fractions, and the LTV is rounded only once, at the end.
This is a simple model described in explanatory articles (Dodo Payments and renue; see the sources below). Estimating the lifetime as the inverse of the churn rate is a rough method that assumes a customer has the same chance of leaving in every period.
Why monthly and yearly results differ
Enter the ARPU and the churn rate for the same period. Mixing a monthly ARPU with a yearly churn rate does not give a correct LTV.
Also, an LTV calculated monthly and one calculated yearly for the same business do not match. In this simple formula the churn rate is treated differently for the two periods. For example (amounts in any currency):
- Monthly: ARPU 100, gross margin 100% (blank), monthly churn rate 5% → LTV = 100 ÷ 0.05 = 2,000 (average lifetime 20 months)
- Yearly: a monthly churn rate of 5% becomes a yearly rate of 1 − (1 − 0.05)¹² = about 45.96%. The yearly ARPU is 100 × 12 = 1,200. LTV = 1,200 ÷ 0.4596 = about 2,611 (average lifetime about 2.18 years)
The monthly view assumes 5% leave every month; the yearly view assumes 45.96% leave at the end of each year. They treat the time of year at which a customer leaves differently, and the yearly figure comes out larger. The value depends on which period you calculate with, so choose one and enter both numbers for it. You can convert between monthly and yearly churn rates in the Churn and Retention Rate Calculator. This calculator does not convert between periods.
When the churn rate is 0
With a churn rate of 0%, the average lifetime (1 ÷ churn rate) is infinite and the LTV cannot be calculated. The calculator shows "Not available". Enter a churn rate above 0. A churn rate of 100% can be calculated (the average lifetime is 1 period, and the LTV equals one period of gross profit).
About the gross margin
If you enter a gross margin, the result is a gross-profit-based LTV. If you leave it blank, 100% (revenue-based) is used, and the result is labeled "revenue-based". With a gross margin of 0%, the LTV is 0.
Examples
- ARPU 100, gross margin 80%, monthly churn rate 5% → gross profit per month 80, average lifetime 20 months, LTV 1,600
- ARPU 100, gross margin blank (revenue-based), monthly churn rate 2% → average lifetime 50 months, LTV 5,000
- Churn rate 100% → average lifetime 1 period, LTV = gross profit per period
- Churn rate 0% → not available
Assumptions and what is not included
- The churn rate is assumed to be the same every period (a constant chance of leaving). If the rate changes with how long customers have been subscribed, or with the plan, look at the real results of groups of customers who joined at the same time (cohorts).
- ARPU and gross margin are assumed to be constant. Discounting future value to the present, returning or paused customers, and upsells (expansion revenue) are not included.
- This is not a net profit after customer acquisition cost (CAC) or fixed costs. The ratio of LTV to CAC is not covered either.
- LTV is a figure for thinking about the profitability of one customer. A high LTV does not by itself mean that a business as a whole is profitable.
Notes
- Enter the ARPU as a number of 0 or more (up to 2 decimal places) and the gross margin and the churn rate as 0 to 100% (up to 2 decimal places). Commas are accepted only as thousands separators (1,234.5).
- For recurring revenue, use the Churn and Retention Rate Calculator for the churn rate. To judge a return on an investment, see the ROI and Payback Period Calculator.
Sources and date checked
The formula and its assumptions were checked in the text of these explanatory articles on October 29, 2026 for the Japanese version of this calculator (they are not official definitions). The pages checked were Dodo Payments "LTV Calculator" and renue "LTV × Subscription", both in Japanese. They were not opened again for this English page.
The definition and the model of LTV differ between companies and articles. The explanation of why monthly and yearly results differ comes from this calculator's own formula.
Frequently asked questions
How is LTV calculated?
ARPU × gross margin ÷ churn rate. For example, with an ARPU of 100, a gross margin of 80% and a monthly churn rate of 5%, the LTV is 1,600.
Why do monthly and yearly results differ?
In the simple formula, the monthly view ("5% leave every month") and the yearly view ("about 45.96% leave at the end of each year") treat the time at which customers leave differently. Use the same period for the ARPU and the churn rate, and say which one you used.
Do I have to enter a gross margin?
No. If it is blank, 100% (revenue-based) is used, and the result says "revenue-based".
What happens if the churn rate is 0%?
The average lifetime is infinite, so the LTV is not available. Enter a value above 0.