This is a customer lifetime value calculator (CLTV or LTV) that helps you understand your SaaS company’s profitability.
Josh Fechter is the founder of The Product Company and has spent 10 years in product marketing and writing software tutorials.
There are three different calculators from basic to advanced. Based on the one you choose, the customer LTV results change as the the number of inputs increase.
Don’t worry if you do not know the inputs for the advanced customer LTV formula. The “Better” lifetime value formula is a good place to start.
Note that the recurring revenue margins are simply the difference between your recurring revenues and your recurring costs. The higher the recurring costs, the less money you have to invest in growth. Let’s put it to use, in our example.
For the Advanced Customer LTV Formula, the WACC is your company’s weighted average cost of capital (WACC). In short, it’s the average rate of return a company expects to compensate all its investors. The weights are the fraction of each financing source in the company’s target capital structure.