How to interpret CLV
This is a simplified recurring-revenue CLV estimate. It uses gross-margin revenue, not top-line revenue, because servicing costs matter. Churn and revenue expansion should be measured over the same period.
Example
If ARPA is $100 per month, gross margin is 70% and monthly churn is 5%, gross-margin revenue is $70 and simplified CLV is $70 / 0.05 = $1,400.
Common mistakes
Keep the churn period aligned with the revenue period. Monthly ARPA should use monthly churn; annual ARPA should use annual churn.
Limitations
The model does not include cohorts, expansion revenue, contraction, reactivation, payback timing or changing churn. Use it as a planning estimate, not as a valuation model.
Last reviewed: 2026-05-17