Whether you are estimating on the spot or checking a result somebody else gave you, the saa s lifetime value calculator is the quickest way to get from account expansion, churn, gross margin, monthly recurring revenue (mrr) and # of customers to average revenue per account (arpa) and customer lifetime value (ltv).
What Is the Saa S Lifetime Value Calculator?
The saa s lifetime value calculator takes account expansion, churn, gross margin, monthly recurring revenue (mrr) and # of customers and turns them into average revenue per account (arpa) and customer lifetime value (ltv).
It is the kind of calculation you would otherwise do on the back of an envelope: mechanical, repeatable and easy to get subtly wrong without noticing.
How the Saa S Lifetime Value Figure Is Built
Each result is calculated from the ones before it, so the working is fully visible. That matters when the answer is going to be quoted to somebody else and you need to be able to explain where it came from.
The figures are exactly as good as the assumptions underneath them. Check the rates, the periods and the tax treatment before you rely on the result.
Reading the Result Sensibly
A small change in an input can move the result by much more than you would expect, particularly where the calculation divides by one of the figures you supplied. That is worth understanding before you rely on a figure.
For anything that will be committed to, write the inputs down beside the result. A number you can reproduce is worth far more than one you cannot explain.
A Worked Example
Working through an example, with account expansion set to 10, churn set to 5, gross margin set to 2, the calculator returns average revenue per account (arpa) of 10, and customer lifetime value (ltv) of 2.4. Substitute your own figures and the same steps produce the same kind of answer.
Frequently Asked Questions
What do I need to work out average revenue per account (arpa)?
Enter account expansion, churn, gross margin, monthly recurring revenue (mrr) and # of customers. The calculator then works through the relationship and reports average revenue per account (arpa) and customer lifetime value (ltv).
What does the saa s lifetime value actually calculate?
It takes account expansion, churn, gross margin, monthly recurring revenue (mrr) and # of customers and converts them into average revenue per account (arpa) and customer lifetime value (ltv) using the standard relationship for this problem. Each step is applied in turn, so every output is traceable back to the numbers you typed in.
How should I enter account expansion?
Use the value you actually have, in the unit shown next to the field. Enter every value in the same unit system. The calculator assumes the figures you supply are consistent, so it cannot correct a mistake that happens before the calculation starts.
Why does a small change in one value move the answer so much?
That happens when an output depends on a ratio, because dividing by a small number magnifies any change in it. Check the units first, then check whether the value you entered is in the range the relationship was designed for.
Can I use this for a quick estimate as well as a precise answer?
Yes. The calculator is built for quick checks, so round your inputs to a sensible number of significant figures and the result will be just as useful. If you need more precision, keep the same method and add digits to the inputs rather than adjusting the method itself.