ARPU and LTV (Lifetime Value) are related — LTV is ARPU extended over the customer lifetime. Together they tell the full unit economics story.
ARPU: the monthly snapshot
ARPU = MRR / Active Users
ARPU tells you the average monthly contribution per customer. It's useful for: - Forecasting scale requirements - Benchmarking pricing - Comparing plans within your product
LTV: the lifetime picture
LTV = ARPU × Gross Margin / Monthly Churn Rate
LTV tells you the total gross profit from a customer over their entire lifetime.
At ARPU of $100, 75% gross margin, 2% monthly churn: LTV = $100 × 75% / 2% = $3,750
The LTV:CAC ratio
The critical connection is LTV:CAC. If LTV is $3,750 and CAC is $1,500, your LTV:CAC ratio is 2.5x — on the lower end of acceptable (3x+ is the benchmark).
To improve LTV:CAC, either: - Increase ARPU (through pricing or upsells) - Reduce churn (extends customer lifetime) - Reduce CAC (more efficient acquisition)
Calculate your ARPU at the ARPU Calculator and LTV at the LTV/CAC Calculator.