technology-strategy-marketing-for-profitable-growth • Business and Technology in Plain English
• Since 1991

Free business financial calculators to measure and manage your profitable growth



Financial terms and math don't have to be a mystery



Business Essentials
Breakeven
Gross Margin
Cost Markup
Set Price Using Markup
Return on Investment (ROI)

Sales and Marketing
Convert Leads to Sales

SaaS Metrics
Customer Acquistion Cost (CAC)
Customer Churn
Customer Lifetime Value (LTV)
Monthly Recurring Revenue (MRR)
SaaS Company Viability

What is Customer Lifetime Value?



Customer lifetime value (LTV) is the average total revenue you expect to earn per customer. In it's simplest form, the customer lifetime is determined by the monthly revenue for the customer x the anticipated number of months' retention.

How to Calculate SaaS Viability



This simple metric is most often combined with several other SaaS calculations to produce a key set of SaaS monitoring numbers. The LTV:CAC ratio is a measure you will visit often. It is a key indicator of the potential viability for your SaaS company. While there is no one absolute ratio, 3:1 or greater is generally accepted as a healthly number. Anything below this ratio is a red flag to revisit the individual SaaS metrics.



Your calculations can be based on any period or product category. Just be sure that all of your numbers are for the same period and product..
Number of Customers
MRR per Customer $
Margin %
Churn Rate %
Customer Acquisition Cost (CAC) $






How to Calculate SaaS Health




Example ...

Package Monthly Price # Subscribers Avg. Months
Starter $ 10 500 12
Growth $ 25 1000 30
Premier $ 75 750 24
Total Subscribers   2250  

Monthly recurring revenue (MRR) = (($10 x 500) + ($25 x 1000) + ($75 x 750)) / 2250 = $ 96,250 / 2250 = $42.78

Average revenue per account (ARPC) = (($10 x 500 x 12) + ($25 x 1000 x 30) + ($75 x 750 x 24)) / 2250 = $ 960

B2B Solutions Company
Total Subscribers 2250
Customer Acquisition Cost (CAC) $ 300
Average MRR per Customers $ 42.78
Monthly Churn Rate 2.3 %
Margin 85 %
LTV $1,581
LTV:CAC Ratio 5.27

($42.78 x .85) = $36.36 / .023 = $1,581

$1,581 / $300 = 5.27







Simple Customer Lifetime Value Formula Cheatsheet



From the MRR calculator:

  • MRR = Monthly subscription revenue per number of customers)

    • From the churn calculator:

  • Churn = ((Ending customer count - beginning customer count) = gain/loss / beginning customer count)

    • From the gross margin calculator:

  • Gross margin = (Revenue - cost of goods sold) / revenue

    • Putting it all together:

  • (MRR x margin) / churn) = LTV per customer

  • LTV:CAC = LTV/CAC










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