Verified Mathematical Model & Formulation
MRR = Active Customers × ARPU ($/month) ARR = MRR × 12 Customer Lifespan (Months) = 1 / (Monthly Churn % / 100) Customer LTV = ARPU × Customer Lifespan
Determines steady-state subscription revenue velocity and calculates long-term Customer Lifetime Value (LTV) using standard SaaS actuarial attrition rates.
Configurable Parameters & Standard Units
- Active Paying Subscribers: (Default: 350 count)
- Average Revenue Per User (ARPU $/mo): (Default: 65 usd)
- Monthly Customer Churn (%): (Default: 3.5 percent)
- Software Gross Margin (%): (Default: 80 percent)
Standard Worked Example & Practical Verification
Scenario: 450 paying business accounts paying an average $79/month with a 3.0% monthly churn rate.
Practical Takeaway: Reducing monthly churn from 3% to 2% extends average customer lifespan by over 16 months and lifts LTV to $3,950.
Frequently Asked Questions
What is a good monthly churn rate for B2B SaaS?
For B2B SaaS serving SMBs, 3% to 5% monthly churn is standard. For mid-market and enterprise B2B SaaS, target monthly logo churn is typically under 1% to 1.5%.
What is the standard ratio of LTV to CAC?
A healthy SaaS business model targets an LTV:CAC ratio of 3:1 or higher, meaning lifetime customer gross profit should exceed acquisition cost by at least triple.