SaaS Churn, LTV & Unit Economics Calculator

The standard SaaS LTV and CAC formulas

Unit economics answer whether each new customer is worth more than they cost - before you scale ads. This page uses the textbook monthly-churn model, not a full cohort waterfall. It is the model VCs still ask for on a first call because it is comparable across companies. It is also wrong in useful ways: it assumes churn is constant, ARPU is flat, and every customer looks like the average. Use it as a dashboard, then graduate to cohorts when you have twelve months of data.

Lifespan (months) = 1 / (churn / 100)
LTV = (ARPU × gross margin) / (churn / 100)
LTV:CAC = LTV / CAC
Payback (months) = CAC / (ARPU × gross margin)
12-month revenue = ARPU × min(12, lifespan)

Worked example with the defaults: $49 ARPU, 3.5% monthly churn, 80% gross margin, $300 CAC. Contribution margin = $39.20 per month. Lifespan = 1 ÷ 0.035 ≈ 28.6 months. Gross LTV = $39.20 ÷ 0.035 = $1,120. LTV:CAC = 3.73:1, which this page badges as healthy. CAC payback = $300 ÷ $39.20 ≈ 7.7 months. Twelve-month customer revenue = $49 × 12 = $588 because expected life is longer than a year.

How to read the health badge

The badge is driven only by LTV:CAC, the ratio most boards track. Under 1.5:1 you are buying a dollar of gross profit for more than a dollar of acquisition cost - labeled Critical / Unsustainable (red). Between 1.5 and 3.0 the model can limp but paid growth is painful - Caution / Below Benchmark (amber). 3.0 to 5.0 is the range most seed and Series A decks claim - Healthy / Industry Standard (green). At 5.0 and above the page shows Hyper-Efficient / Ready to Scale (indigo). That last band is a warning as much as a compliment: check whether CAC is under-reported because the founder is still closing every deal, or whether you are starving growth.

Screen readers get the label and the numeric ratio via aria-label, not just a color. Copy the summary into an investor update; it is formatted as plain text for Slack and email, with ARPU, churn, margin, CAC, lifespan, LTV, the ratio plus health name, payback, and 12-month revenue.

ARPU, churn, margin, and the mistakes that inflate LTV

ARPU is average revenue per account (or user) per month. If you sell annual contracts, divide the annual invoice by 12 rather than treating a $588 year as $588 MRR. Mixing annual cash with monthly churn will make LTV look heroic. If you have expansion revenue, you can raise ARPU - but then you should also model a separate expansion rate, which this simple engine does not. Keep ARPU conservative (logo revenue, no hoped-for upsell) unless you already have a measured net revenue retention above 100%.

Monthly churn is cancellations divided by customers at the start of the month, times 100. Logo churn, not dollar churn. A 3.5% monthly logo churn is roughly 35% annual if it compounds, which is typical for prosumer SaaS and fatal for enterprise. Enterprise teams often sit under 1% monthly. Do not enter 0%: lifespan and LTV divide by churn, and zero implies infinite life. The calculator blocks that case. If you have annual contracts with almost no mid-term cancel, convert to a monthly equivalent (for example 8% annual ÷ 12 ≈ 0.67% monthly) rather than pretending churn is zero.

Gross margin here is contribution margin on software: revenue minus hosting, support cost of goods, and payment fees. Do not use 100% unless you truly have no variable cost. Inflated margin inflates LTV and hides a payback problem. Stripe and similar processors alone are often 3% of revenue; support and infrastructure can be another 10-20% at small scale. Eighty percent is a fair default for a productized SaaS. Hardware-plus-software or services-heavy “SaaS” should sit much lower.

CAC payback and when not to scale spend

Payback is how many months of contribution margin it takes to earn back what you spent to acquire the customer. Many B2B teams target under 12 months; consumer apps often need it faster because churn is higher and cash is tighter. A 7.7-month payback at the defaults is comfortable. If payback stretches past 18 months, you are financing customers with equity or debt. That can be rational at high LTV:CAC, but only if churn really is that low and you can survive the cash gap.

CAC must include fully loaded sales and marketing: ads, tools, agencies, and the fully loaded cost of the people who close. Founder time is often omitted, which is why early ratios look like 8:1 and collapse when you hire a first AE. Recalculate with a realistic fully loaded CAC before you increase paid spend. If the badge flips from healthy to caution, the channel does not scale - the model was subsidized by unpaid labor.

Frequently Asked Questions (FAQ)