SaaS Revenue & Business Valuation Tool

Turn MRR, churn, and unit economics into LTV, runway, and a defensible valuation range.

Business Inputs

Monthly Recurring Revenue

Monthly Churn Rate

Implies ~41.7 month average customer lifespan

ARPU (avg revenue / user)

CAC (customer acquisition cost)

Gross Margin

Cash on Hand

Monthly Burn

Key Metrics

Annual Run Rate

$576,000

Customer LTV

$4,193

LTV : CAC Ratio

6.55:1

Healthy (≥3:1)

Runway

14.1 mo

LTV:CAC ratio vs. the 3:1 healthy-business benchmark

Estimated Valuation Range

Conservative (low multiple)

$2,880,000

Midpoint Estimate

$4,320,000

Optimistic (high multiple)

$5,760,000

Multiples scale with LTV:CAC efficiency and churn quality, ranging roughly 2.5x–10x trailing ARR — consistent with public and private SaaS comparables for businesses at this retention and unit-economics profile.

24-Month MRR Trajectory

How the Mathematical Formulas Work

Customer Lifetime Value estimates the total gross profit a business expects from a single customer over their entire relationship with the product. FinMetric Pro computes it from churn, ARPU, and gross margin rather than treating LTV as a flat assumption:

Average Lifespan (months) = 1 / monthly churn rate
LTV = ARPU × Gross Margin × Average Lifespan
LTV : CAC = LTV / CAC
ARR = MRR × 12

The 1/churn relationship comes from modeling customer retention as a geometric series: if a fixed fraction of customers cancel every month, the expected number of months a customer stays is the reciprocal of that fraction. A 2% monthly churn rate implies an average 50-month lifespan, while a 5% churn rate cuts that to 20 months — which is why even small churn differences compound into large LTV swings. Multiplying by gross margin (rather than raw ARPU) ensures LTV reflects profit the business actually keeps, not top-line revenue, which is the figure that should be compared against acquisition cost.

Runway divides current cash on hand by monthly burn (the net cash outflow after revenue), giving the number of months the business can operate before running out of cash absent new funding or a change in burn. Valuation is estimated as a multiple of Annual Run Rate, where the multiple itself is scaled up or down by how efficient the LTV:CAC ratio is and how low monthly churn is — mirroring how public market and private equity buyers price recurring-revenue businesses.

Key Terminology Defined

MRR: Monthly Recurring Revenue — predictable subscription revenue collected every month, excluding one-time fees.
ARR: Annual Run Rate — MRR annualized (× 12), used as the standard basis for SaaS valuation multiples.
Churn Rate: The percentage of customers (or revenue) lost in a given period, typically measured monthly for SaaS businesses.
ARPU: Average Revenue Per User — total recurring revenue divided by active customer count.
CAC: Customer Acquisition Cost — total sales and marketing spend divided by new customers acquired in the same period.
LTV:CAC Ratio: Lifetime Value divided by acquisition cost. A ratio at or above 3:1 is generally considered a healthy, scalable unit-economics profile.

Practical Case Studies & Financial Strategies

Consider two SaaS companies both at $48,000 MRR. Company A churns 1.8% monthly with a $640 CAC; Company B churns 4.5% monthly with the same CAC. Company A's average customer lifespan is roughly 56 months versus Company B's 22 months — meaning Company A's LTV is more than double Company B's despite identical top-line revenue today. An acquirer or investor pricing these businesses off ARR alone would badly mis-value one of them; pricing off LTV:CAC-adjusted multiples corrects for that.

For founders, the highest-leverage lever is usually churn reduction, not acquisition volume — because churn compounds against every cohort simultaneously, while CAC only affects new customers. Cutting monthly churn from 4% to 2% roughly doubles average customer lifespan and therefore roughly doubles LTV, which flows directly into both LTV:CAC health and the valuation multiple a business can command.