How is LTV calculated?

LTV = (ARPU × gross margin) / monthly churn rate. The gross-margin factor matters — using raw ARPU overstates LTV because it ignores COGS. This calculator uses the margin-adjusted version, which is what finance will ask for when defending the number.

What's a healthy LTV:CAC ratio?

The operator consensus is 3× as the minimum for a sustainable business. Below 3× suggests retention or acquisition efficiency needs work. Above 5× sometimes signals under-investment in acquisition — if growth is below expectations, redirect marginal dollars from retention to acquisition.

Why does the calculator show a churn-sensitivity table?

Because reducing churn is the one thing lifecycle programs actually do. Showing LTV and LTV:CAC at current-churn minus 0.5, 1.0, 1.5, and 2.0 percentage points makes the economic case for retention investment visible. A 1pp monthly-churn drop often doubles LTV for low-churn SaaS.

How do I calculate payback period?

Payback (months) = CAC / (ARPU × gross margin). It's the number of months of contribution margin required to recoup acquisition cost. Under 12 months is fast; 12–24 months is industry average; above 36 is capital-intensive for the unit economics.

What if my pricing isn't monthly subscription?

For annual contracts, divide the annual price by 12 to get ARPU. For transactional / marketplace businesses, use average monthly revenue per customer (AOV × avg monthly orders). Monthly churn should reflect whatever cadence you bill at — the key is internal consistency.

Does this replace a real cohort LTV analysis?

No — this is the point-in-time sanity check. A proper cohort LTV uses each monthly cohort's actual retention curve instead of assuming constant churn, which is more accurate for businesses where early-month churn differs from steady-state. For that, use Orbit's lifecycle-reporting skill or pipe cohort data into your BI tool.

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LTV / Payback Calculator

Name: Orbit
Availability: InStock
Author: Justin Williames

Customer lifetime value, LTV-to-CAC ratio, and payback period for subscription and recurring-revenue businesses — with a churn-sensitivity table that shows the exact economic impact of a 1pp retention improvement.

ARPU (monthly)

$ / month

Average revenue per user per month. For annual plans, divide annual price by 12.

Gross margin

Revenue minus COGS, as a % of revenue. SaaS typically 70–90%. Marketplace typically 20–40%.

Monthly churn rate

Share of customers lost per month. 3% monthly ≈ 31% annual. 2% is healthy SaaS; 5%+ is concerning.

Customer acquisition cost

Fully-loaded CAC: paid media + sales salaries + tools, divided by new customers won. Use your blended figure.

Formulas: LTV = (ARPU × GM) / churn · Payback = CAC / (ARPU × GM)

LTV

$1,388

Contribution margin over a customer's full lifetime

LTV : CAC

7.7×

strong

Operator benchmark: ≥ 3× is healthy

Payback period

4.3

months · Under 6 months — fast

Months of contribution margin to recoup CAC of $180.00

Operator read

LTV:CAC of 7.7× with 4.3-month payback. Strong economics. Potentially under-investing in acquisition — if growth isn't fast enough, consider reallocating marginal dollars from retention to acquisition to capture the unit-economics headroom.

Churn sensitivity — what lifecycle buys you

Scenario	Monthly churn	LTV	LTV:CAC	vs. current
Churn −0.5pp	2.5%	$1,666	9.3×	+$277.67
Churn −1.0pp	2.0%	$2,083	11.6×	+$694.17
Churn −1.5pp	1.5%	$2,777	15.4×	+$1,388
Churn −2.0pp	1.0%	$4,165	23.1×	+$2,777
Current	3.0%	$1,388	7.7×	—

Every row holds CAC, ARPU, and gross margin fixed — only churn moves. This is the exact knob lifecycle programs turn: every percentage point of monthly churn you remove compounds into a permanent LTV lift.

Monthly CRM economics data drop

What the typical LTV:CAC ratio looks like across the operators using Orbit, which lifecycle programs move payback fastest, and where 3-month cohorts land vs 12-month. Anonymous aggregate data.

Go deeper

Guides on this topic

The long-form guides that explain the thinking behind the tool. Written for operators who want to know not just what to do, but why.

About the LTV / Payback Calculator

A free, margin-adjusted customer-lifetime-value calculator with LTV:CAC ratio, payback period in months, and a churn-sensitivity table that shows the exact economic impact of a 1–2pp monthly-churn reduction — the lever lifecycle programs exist to pull. Formulas use the standard subscription/recurring-revenue model: LTV = (ARPU × gross margin) / monthly churn; payback = CAC / (ARPU × gross margin). Pure client-side — no API calls, no data leaving your browser.

How to use

Enter your ARPU (monthly) — average revenue per user per month. For annual plans, divide annual price by 12.
Enter gross margin (%) — revenue minus COGS. SaaS is typically 70–90%; marketplace is 20–40%.
Enter monthly churn rate (%) — share of customers lost per month. 3% monthly ≈ 31% annual.
Enter CAC — fully-loaded acquisition cost (paid media + sales + tools ÷ new customers).
Read LTV, LTV:CAC ratio, payback months, and the churn sensitivity table.

Common use cases

Defending lifecycle-program spend to finance or a CFO
Pricing-change modelling (what happens to LTV if we change margin or churn)
Retention-investment sizing — how much is a 1pp churn reduction worth over three years?
Acquisition-channel qualification — CAC threshold for a given payback target
Unit-economics health checks for board decks and investor updates

Who it's for

CRM and lifecycle leads defending the work, growth leaders scoping investment, consultants building the ROI case for a retention program, finance partners who want a quick sanity-check on unit economics.

Frequently asked questions

How is LTV calculated?: LTV = (ARPU × gross margin) / monthly churn rate. The gross-margin factor matters — using raw ARPU overstates LTV because it ignores COGS. This calculator uses the margin-adjusted version, which is what finance will ask for when defending the number.
What's a healthy LTV:CAC ratio?: The operator consensus is 3× as the minimum for a sustainable business. Below 3× suggests retention or acquisition efficiency needs work. Above 5× sometimes signals under-investment in acquisition — if growth is below expectations, redirect marginal dollars from retention to acquisition.
Why does the calculator show a churn-sensitivity table?: Because reducing churn is the one thing lifecycle programs actually do. Showing LTV and LTV:CAC at current-churn minus 0.5, 1.0, 1.5, and 2.0 percentage points makes the economic case for retention investment visible. A 1pp monthly-churn drop often doubles LTV for low-churn SaaS.
How do I calculate payback period?: Payback (months) = CAC / (ARPU × gross margin). It's the number of months of contribution margin required to recoup acquisition cost. Under 12 months is fast; 12–24 months is industry average; above 36 is capital-intensive for the unit economics.
What if my pricing isn't monthly subscription?: For annual contracts, divide the annual price by 12 to get ARPU. For transactional / marketplace businesses, use average monthly revenue per customer (AOV × avg monthly orders). Monthly churn should reflect whatever cadence you bill at — the key is internal consistency.
Does this replace a real cohort LTV analysis?: No — this is the point-in-time sanity check. A proper cohort LTV uses each monthly cohort's actual retention curve instead of assuming constant churn, which is more accurate for businesses where early-month churn differs from steady-state. For that, use Orbit's lifecycle-reporting skill or pipe cohort data into your BI tool.

Related Orbit tools

Using Claude?

Orbit turns LTV modelling into an always-on decision input.

Inside Orbit for Claude, the Retention Economics skill ingests your actual cohort data from Braze (or any ESP), builds the cohort-LTV curve rather than assuming constant churn, and re-runs the model every month. When churn drifts, Claude flags it and shows the LTV impact before you've noticed on the dashboard. Free for everyone — the Claude extension is the power-user upgrade, not a gated feature.

Orbit web apps