LTV answers the most basic question in any subscription business: how much is one customer actually worth to you over the entire relationship? Not just month one. The whole thing.
Get this number right and you know how much you can spend to acquire a customer and still be profitable. Get it wrong and you’ll either underspend on growth (leaving money on the table) or overspend on CAC (running out of cash). Both are bad.
The LTV formula for subscription businesses
LTV = (ARPU × Gross Margin %) / Monthly Churn Rate
ARPU is average revenue per user per month. Gross margin strips out your direct costs (hosting, support, third-party APIs) to tell you what percentage of revenue is actual contribution. Churn rate is the fraction of customers who leave each month.
At 1% monthly churn, the average customer stays 100 months (8+ years). At 5% churn, average tenure is 20 months. That difference alone will collapse your LTV by 5x.
Why gross margin matters more than revenue
A company billing ₹10,000/month per customer sounds great. But if hosting costs ₹4,000 and customer support takes another ₹2,000, gross margin is only 40%. LTV is calculated on contribution, not revenue.
This is where bootstrapped Indian SaaS founders sometimes fool themselves. Revenue looks healthy, LTV looks healthy on paper, then they calculate actual gross margin and realize infrastructure and support are eating 50% of every rupee.
LTV benchmarks for Indian SaaS
For B2B SaaS selling to Indian SMBs, LTV in the range of ₹2-5L is common at seed stage. Series A companies targeting mid-market tend to have LTV of ₹10-25L per customer. Enterprise SaaS? Can be ₹1Cr+ per account.
The LTV:CAC ratio is the health check that ties both numbers together. See the LTV:CAC calculator for that.