Estimate lifetime value as margin-adjusted ARPU divided by monthly churn rate.
Overview
LTV summarizes expected gross profit from a customer over their life with you.
Enter ARPU, gross margin percent, and monthly churn. LTV = (ARPU × margin%) ÷ churn%.
Use the same period definitions as your churn dashboard so finance and growth teams argue from one model.
Steps
Average revenue per customer per month.
Gross or contribution margin.
Average monthly churn rate.
Review LTV dollars.
Raise churn to see how fragile LTV is.
Math
LTV = (ARPU × grossMargin%/100) / (churnRate%/100)
Divide margin-adjusted monthly revenue by the monthly churn fraction.
Worked cases
(40×0.75)/0.025 = $1,200
$1,200 LTV.
45/0.025 = $1,800
$1,800 LTV.
30/0.05 = $600
$600 LTV.
Why use this
Questions