LTV Calculator Worksheet: Lifetime Value by Hand

An LTV calculator returns a lifetime value the moment you type two numbers. This worksheet shows you where that number comes from, where it lies to you, and what involuntary churn quietly does to it over a year. Lifetime value decides how much you can spend to acquire a customer and how much a point of churn is really worth — decisions too expensive to rest on a figure nobody on the team can derive on a whiteboard. Work the tables below with your own ARPA and churn rate and you will finish with LTV two ways, an LTV to CAC ratio you can defend, and a drag table that prices your failed payments in lifetime terms.

The inputs you need

Input	Definition	Your figure
ARPA	Average revenue per account per month (MRR ÷ accounts)	____
Monthly logo churn rate	Accounts lost ÷ accounts at start of month	____
Gross margin %	Revenue minus cost to serve, as a share of revenue	____
CAC	Fully loaded cost to acquire one customer	____
Failed-payment rate	Share of renewal charges that fail on first attempt	____

If you do not have a clean churn figure, work one first — every LTV formula below divides by it, so a sloppy churn input produces a confidently wrong LTV. The subscription metrics formula sheet keeps churn, ARPA, and LTV in one consistent notation, and our companion piece on revenue churn vs logo churn explains which churn definition to use when your accounts pay very different amounts.

Method 1 — LTV from ARPA and churn

The standard formula is: LTV = ARPA ÷ monthly churn rate. The logic is simple: if 4% of customers leave each month, the average customer stays 1 ÷ 0.04 = 25 months, and pays ARPA for each of those months.

Worked example, for illustration only: ARPA is $50 per month and monthly churn is 4%. Expected lifetime = 1 ÷ 0.04 = 25 months. LTV = $50 ÷ 0.04 = $1,250. Now run yours: divide your ARPA by your churn rate expressed as a decimal. That is your revenue LTV — the top-line value of an average customer before costs.

Check the sensitivity before you trust it: at 5% churn the same $50 ARPA gives an LTV of one thousand dollars even; at 3% it gives $1,667. One point of churn moves this LTV by hundreds of dollars, which is why small churn improvements outperform most acquisition tweaks — and why the churn input deserves a worksheet of its own.

Method 2 — LTV from margin

Revenue LTV overstates what a customer is worth to spend against, because serving them costs money. The margin version is: LTV = (ARPA × gross margin %) ÷ monthly churn rate.

Worked example, for illustration only: ARPA $50, gross margin 75%, churn 4%. Margin LTV = ($50 × 0.75) ÷ 0.04 = $37.50 ÷ 0.04 = $937.50. Use revenue LTV for retention economics — what a saved customer pays you — and margin LTV for acquisition decisions, where spend has to come out of actual contribution. Reporting one while deciding on the other is how teams overspend on acquisition with a clear conscience.

Step 3 — LTV to CAC, worked

The ratio is: LTV : CAC = margin LTV ÷ CAC. Worked example, for illustration only: margin LTV $937.50 and a fully loaded CAC of $280 gives a ratio of 937.50 ÷ 280 = 3.3 to 1. Also compute the payback period alongside it: Payback months = CAC ÷ (ARPA × gross margin %) = $280 ÷ $37.50 = about 7.5 months.

Rules for honest inputs: CAC must include the fully loaded cost — spend, tooling, and the people who run acquisition, not just media. And because the ratio inherits every error in your churn rate, recompute it whenever churn moves, not once a year. A ratio built on last year's churn is a historical artifact, not a planning tool.

Step 4 — The involuntary churn drag table

Here is the part most LTV worksheets omit. Part of your churn is not customers choosing to leave — it is payments failing. Recurly research estimates that 20–40% of subscriber churn is involuntary. Involuntary losses inflate your churn rate, which deflates LTV through the denominator, which then caps what you think you can spend on acquisition. Failed payments tax you twice: the lost customer, and the lower LTV you plan around.

The table below holds ARPA constant at $50, for illustration only, and varies only the churn rate — read it as "same product, same price, different amounts of churn, including the involuntary slice":

Monthly churn	Expected lifetime	Revenue LTV at $50 ARPA	LTV lost vs the 3% row
3.0%	33.3 months	$1,667	—
3.5%	28.6 months	$1,429	$238
4.0%	25.0 months	$1,250	$417
4.5%	22.2 months	$1,111	$556
5.0%	20.0 months	1,000	$667
6.0%	16.7 months	$833	$833

To build your own version: take your current churn rate, subtract a realistic involuntary slice — your failed-payment endings divided by your customer base — and recompute LTV at the lower rate. The difference is the lifetime value currently being destroyed by billing failures, per customer. Multiply by the number of customers you acquire in a year and the abstract "churn problem" becomes a budget line. Then price the fix directly: model your actual failure volume in the recovery calculator and set your results against the failed payment recovery benchmarks, which note that low price points, under $10/mo, show the highest involuntary share at roughly 35% (Churnkey analysis) — if you sell at a low price, your drag row is probably worse than average.

Common LTV worksheet errors

• Using revenue churn in a logo formula. ARPA divided by revenue churn mixes two definitions. Match the churn type to the question: logo churn for customer counts, revenue churn for revenue-weighted value.
• Averaging ARPA across unlike plans. A blended ARPA across a $10 tier and a $200 tier produces an LTV that describes nobody. Run the worksheet per tier when the spread is wide.
• Treating annual-plan customers as monthly. Annual subscribers churn on a yearly clock. Either annualise their figures separately or exclude them and say so on the worksheet.
• Freezing the inputs. LTV is a snapshot of current ARPA and current churn. Date the worksheet; an undated LTV gets quoted for years.

The bottom line

LTV is ARPA divided by churn, disciplined by margin, and judged against CAC — simple arithmetic that fails only when the inputs are sloppy. Work it by hand once a quarter, keep the involuntary slice visible as its own line, and you will see exactly how much lifetime value your billing failures are removing before anyone argues about acquisition spend. If the drag table is the part that stings, that slice is the one built to be recovered — Swipe Again works failed payments with decline-aware retries and branded dunning for a flat $179/mo, and you can check the fit on pricing.

Frequently asked questions

Which LTV formula should I use, revenue or margin?

Use margin LTV for acquisition and payback decisions, because spend must come out of contribution. Use revenue LTV when valuing retention and recovery work, where the question is how much billing a saved customer represents. State which one you are quoting every time.

How do I calculate LTV if my churn rate changes every month?

Use an average churn rate over a stable window, usually the last six months, and note the window on the worksheet. For young businesses with volatile churn, present LTV as a range across your recent churn rates rather than a single point.

What LTV to CAC ratio should I aim for?

There is no universal target that survives contact with your margins and payback period. A ratio is only useful computed honestly — fully loaded CAC, margin LTV, current churn — and read alongside payback months. A strong ratio with a very long payback can still strain cash.

Does LTV use gross churn or net churn?

Gross. Expansion revenue from existing customers belongs in its own analysis. Netting expansion against churn inside the LTV formula flatters the number and hides exactly the losses the worksheet exists to expose.

How does involuntary churn affect LTV?

It raises the churn rate in the denominator, which shortens expected lifetime and lowers LTV for every customer, including the ones whose payments never fail. Reducing involuntary churn lifts LTV mechanically, without any change to your product or pricing.