What is Lifetime Gross Profit?

Lifetime gross profit (LTGP) shows how much gross profit one customer creates over their full time with your business. It starts with customer revenue, subtracts the cost to serve that customer, and then multiplies the result by how long the customer usually stays.

In my conversations with Churn.io customers, LTGP almost always comes in 20% to 40% below lifetime value (LTV) once hosting, support, and payment processing fees are included.

Most teams don’t see that gap until they run the math for the first time.

Key takeaways

• Lifetime gross profit (LTGP) = average gross profit per customer × average customer lifespan.
• For most SaaS businesses, LTGP runs 20% to 40% below LTV once they include hosting, support labor, and payment processing costs.
• Use LTGP:CAC to set acquisition spend because LTV:CAC can make growth look healthier than it is.
• Target 3:1 LTGP:CAC for automated businesses, 6:1 for businesses with one human touchpoint, and 9:1 for businesses with 2 human touchpoints.
• Your churn rate sets your average customer lifespan, and average lifespan feeds into LTGP.
• Reducing churn by 1 percentage point raises LTGP more than raising price by 1% in most subscription models.

The LTGP formula

The LTGP formula starts with monthly gross profit per customer and multiplies it by average customer lifespan. It shows how much profit one customer is likely to create before they churn.The formula is:

Monthly Gross Profit per Customer × Average Customer Lifespan

Why LTGP matters

LTV is the number most teams use to set customer acquisition cost, or CAC. If your LTV is $1,000 and your CAC is $250, your LTV:CAC ratio looks healthy at 4:1.

But if your actual LTGP is $720, your LTGP:CAC ratio is 2.9:1. That’s slightly below a 3:1 benchmark, and growth may still depend on CAC payback and cash conversion timing.

How to calculate LTGP for a subscription business

The math runs in four steps:

1. Churn rate to average lifespan
2. Lifespan to gross profit
3. Gross profit to LTGP
4. LTGP to the ratio.

Step 1. Calculate average customer lifespan

Start with monthly churn rate. Then divide 1 by that number to get the average customer lifespan.

At 5% monthly churn, average customer lifespan is 20 months.

Average Customer Lifespan = 1 / Monthly Churn Rate

See how to calculate churn rate for the full method.

Step 2. Identify your SaaS COGS

List the costs needed to serve the customer.

Hosting and payment fees are usually obvious. Customer support and customer success costs are easier to miss.

SaaS Capital benchmarks support and success combined at 8% of ARR median across private B2B SaaS companies. But only the retention and support portion belongs in COGS. Upsell or account-management work belongs in sales and marketing OpEx.

Step 3. Calculate gross profit per customer

Now calculate monthly gross profit per customer, which uses this formula:

Monthly Gross Profit per Customer = ARPA × (1 - COGS%)

Then multiply monthly gross profit per customer by average customer lifespan.

That gives you LTGP.

Step 4. Divide LTGP by CAC

Finally, divide LTGP by CAC.

That ratio shows whether your acquisition math works.

What LTGP:CAC ratio should you target?

The standard SaaS LTV:CAC benchmark is often 3:1. Hormozi’s framework is stricter because it adjusts the target based on how much human labor is involved.

He argues that 3:1 works best when lead generation, conversion, and fulfillment are automated. As the business adds sales or customer success labor, the business needs a higher LTGP:CAC ratio.

Where LTGP can mislead you

The most common mistake is using LTV:CAC above 3:1 as your main unit economics check without calculating LTGP. That can make the numbers look healthy while the real economics are weak or negative.

LTGP can also overstate customer value in two cases.

First, high-support customers may cost more each month than your average support cost suggests. If one customer segment uses far more support than the rest of your base, average COGS can hide the real cost of that segment.

Then, customers who churn and resubscribe create several short lifespans instead of one long lifespan. The formula treats lifespan as one average, so track cohort-level COGS when this pattern is common enough to affect your numbers.

Calculate LTGP by segment

Segment-level LTGP helps you see which customers are worth more after costs.

Your largest segment may bring in the most revenue, but your highest-LTGP segment may produce more profit. That difference matters when you decide where to spend your acquisition budget.

For example, one segment may have high ARPA but heavy support costs and short customer lifespans. Another segment may have lower ARPA but lower COGS and stronger retention. Revenue alone can point you toward the wrong segment, while LTGP helps show which segment creates better long-term profit.

FAQs

What's the difference between LTV and LTGP?

LTV counts revenue. LTGP subtracts COGS from that revenue before multiplying by lifespan. LTGP is almost always lower.

What LTGP:CAC ratio is healthy?

For fully automated businesses, 3:1 is the target. If the business has one human touchpoint, such as sales or customer success, the target is 6:1. If the business has two human touchpoints, such as sales and customer success, the target is 9:1 or higher.

Who popularized LTGP?

Alex Hormozi popularized LTGP:CAC in $100M Leads and related business content.