PricingNest

LTV Sensitivity Analysis

Stress-test LTV assumptions to see how churn and margin shifts change unit economics.

Quick checklist

  • Start with realistic churn and margin assumptions.
  • Test small deltas in churn (1-2 points).
  • Validate ARPA and payback together.
  • Use the same time window across inputs.
  • Document the assumptions behind each scenario.

Step-by-step

  1. Calculate baseline LTV from ARPA, margin, and churn.
  2. Increase churn by 1-2 points and recalc LTV.
  3. Reduce margin by 5 points to model cost pressure.
  4. Compare LTV to CAC payback constraints.
  5. Use the sensitivity range to set guardrails.

What to watch

  • LTV sensitivity is usually dominated by churn.
  • Margin changes matter when usage costs spike.
  • Payback targets should be tightened when LTV drops.

Common mistakes

  • Using gross revenue instead of contribution margin.
  • Mixing annual churn with monthly ARPA.
  • Treating churn as constant across segments.

Tools to use