# Customer Lifetime Value Calculator

URL: https://www.paydude.io/resources/tools/ltv-calculator
Type: Free interactive calculator
Summary: Calculate revenue LTV, margin-adjusted LTV and discounted LTV side by side. See how much the standard formula overstates your real customer value.

Most LTV calculators return one number: revenue per customer divided by churn. It is the largest of the three figures below and the least useful, because it counts money you never keep.

## Summary

Revenue LTV counts money that goes straight back out as costs. Margin-adjusted LTV is the figure to use in any LTV:CAC ratio. The 1/churn formula assumes constant churn, which no cohort has. At an 80% margin, revenue LTV overstates real value by 25%.

## The three formulas

**Same customer, three answers**

| Method | Formula | At $50 ARPU, 3% churn, 80% margin |
| --- | --- | --- |
| Revenue LTV | ARPU ÷ churn | $1,667 |
| Margin-adjusted | (ARPU × margin) ÷ churn | $1,333 |
| Discounted | (ARPU × margin) ÷ (churn + discount rate) | $1,053 |

The differences are not rounding. Revenue LTV is 58% higher than the discounted figure, and if you build an LTV:CAC ratio on it you will conclude your acquisition is a third more efficient than it is.

## Why margin matters

A customer paying $50 a month does not give you $50. Hosting, support, third-party APIs and payment fees come out first. At an 80% gross margin you keep $40 — so lifetime value built on the $50 figure is counting money that was never yours.

> **Payment fees are part of this:** On a $50 monthly plan, card processing at 2.9% + 30¢ is about $1.75 — roughly 3.5% of revenue, straight out of the margin that determines LTV. It is a small line that compounds across every month of every customer's life.

## Why discounting matters

Revenue arriving in year four is worth less than revenue arriving this month — you cannot spend it, and you carry the risk of never receiving it. Discounting at around 10% a year is the convention. The longer your customer lifetime, the larger the correction.

## The assumption all three share

Every formula above uses 1 ÷ churn for lifetime, which assumes churn is constant. It never is. Real cohorts churn hardest in the first months and then flatten, so a single early rate extrapolated forever understates the customers who stay.

If you have twelve months of cohort data, the [cohort retention calculator](https://www.paydude.io/resources/tools/cohort-retention-calculator) sums the actual curve instead of assuming one.

**Lower fees, higher margin, higher LTV** Payment fees are one of the few LTV inputs you can change this week. — [See Paydude pricing](https://www.paydude.io/pricing)

## Frequently asked questions

### What is a good LTV?

On its own, none — LTV only means something against CAC. A $200 LTV is excellent if customers cost $40 to acquire and terrible if they cost $300. Use the LTV:CAC ratio rather than judging LTV alone.

### Should I use revenue or margin-adjusted LTV?

Margin-adjusted, always, and especially in any LTV:CAC ratio. Revenue LTV counts money that leaves again as hosting, support and payment fees. At an 80% margin it overstates real value by 25%.

### Why does the 1/churn formula overstate LTV?

Because it assumes a constant churn rate. Real cohorts churn hardest early and then flatten, so extrapolating an early rate forever misrepresents the customers who survive. It is directionally useful and precisely wrong.

### How do payment fees affect LTV?

They reduce gross margin, which reduces LTV proportionally. On a $50 plan, 2.9% + 30¢ costs about 3.5% of revenue every month for the life of the customer — a small percentage that compounds over years.