Lifetime value per subscriber with payback period and LTV:CAC.
Inputs
Avg revenue per user per month
After COGS & variable costs
% of subscribers lost each month
Customer acquisition cost
Results
LTV—
Avg Lifetime
—
Contribution / Mo
—
LTV:CAC Ratio
—
Payback period & sensitivity
Churn Rate
Avg Lifetime
LTV
LTV:CAC
Payback (months)
About this calculator
Subscriber LTV is the foundation of every subscription business decision — how much you can spend to acquire a customer, whether a feature investment pays back, whether a churn-reduction campaign is worth running. Get LTV wrong and every downstream decision is wrong. The formula is deceptively simple but the inputs are easy to misuse.
The standard formula — LTV = ARPU × Gross Margin ÷ Monthly Churn — assumes constant ARPU, constant churn, and a steady-state cohort. In reality ARPU often grows over time as customers upgrade, churn often declines after the first 90 days as bad-fit customers leave first, and cohorts have different retention curves. For most operating decisions the steady-state formula is close enough; for board-level reporting and fundraising, weighted-cohort LTV is more defensible.
The most common mistake is using revenue rather than contribution margin. A subscription business with $30 ARPU and 70% gross margin has $21/mo of gross contribution per subscriber. If monthly churn is 5%, average lifetime is 20 months and gross-margin LTV is $420. But if your variable costs (processing, fulfillment, CS overhead) eat another 15% of revenue, real contribution is closer to $16.50/mo and contribution-margin LTV is $330 — 21% lower than the headline number. Decisions based on the inflated number lead to overspending on CAC.
Pair this with the Churn Revenue Impact Calculator (to see what a 1% churn reduction does to MRR over 12 months), the Subscription MRR forecaster (to project the cohort base 12 months forward), and the LTV:CAC Ratio Calculator for non-subscription comparisons. The three together calibrate your acquisition spend against realistic lifetime economics.
Frequently asked questions
How is subscriber LTV calculated?
The standard formula is LTV = (ARPU × Gross Margin %) ÷ Monthly Churn Rate. ARPU (average revenue per user) times gross margin gives you the contribution dollar per subscriber per month. Dividing by churn rate captures the expected lifetime in months — if 4% of subscribers churn each month, the average customer stays 1/0.04 = 25 months. Multiply contribution per month by lifetime months and you get LTV.
Why does churn matter so much in LTV?
Because lifetime is the inverse of churn. Reducing monthly churn from 5% to 4% extends average customer lifetime from 20 months to 25 months — a 25% LTV increase from a 1-percentage-point churn improvement. This is why retention investments compound and why most mature subscription businesses spend more on retention than acquisition.
What is a healthy LTV:CAC ratio?
The textbook answer is 3:1 — you should make $3 of lifetime contribution for every $1 spent on acquisition. Below 3:1 means you are not earning enough margin to cover CAC, retention investments, and overhead. Above 5:1 often means you are under-investing in growth. Best-in-class consumer subscriptions hit 4-6:1; B2B SaaS often targets 5:1 or higher because of long contract terms.
Should I use gross margin or contribution margin in this formula?
Use contribution margin if you want a defensible operating number. Gross margin (revenue − COGS) overstates LTV because it ignores variable costs like payment processing, fulfillment, and customer service per subscriber. Contribution margin (revenue − COGS − all variable costs) gives a more honest LTV. Most public formulas use gross margin for simplicity, but operators serious about unit economics use contribution margin.
How does this differ from the LTV:CAC Ratio Calculator?
The LTV:CAC tool models LTV from average order value, repeat purchase behavior, and gross margin — appropriate for transactional ecommerce. This subscription-specific tool models LTV from monthly recurring revenue and churn — appropriate for any business where customers pay over time on a subscription basis. They share the same fundamental math but different inputs reflect different business models.