How b2b SaaS can increase LTV & reduce churn with embedded finance

Why LTV & churn matter for b2b SaaS

For vertical SaaS platforms, increasing customer lifetime value (LTV) and reducing churn are critical to long-term success. Unlike horizontal SaaS, vertical platforms serve niche b2b markets with a limited number of prospective customers, meaning retention and engagement are even more important to drive sustainable growth.

One of the most effective strategies to boost LTV and minimize churn is embedded finance—integrating financial services directly into your software. By doing so, SaaS providers can create a frictionless experience, drive engagement, and unlock new revenue streams with minimal up-front costs. More importantly, embedded finance allows SaaS platforms to solve more customer problems in one place, strengthening customer relationships and preventing churn to competitors who offer capital solutions.

In this article, we’ll take a closer look at churn and LTV and how to calculate them, and explore how b2b vertical SaaS companies can leverage embedded finance to enhance customer retention, improve stickiness, and increase overall LTV.

What is SaaS LTV and how to calculate it

Customer Lifetime Value (LTV) is a crucial metric that measures the total revenue a SaaS company can expect from a customer over their entire relationship. In other words, it’s a measure of the revenue per month and the average length of time customers remain customers. A higher LTV indicates stronger customer retention and profitability, making it a key growth indicator for SaaS businesses.

How to calculate SaaS LTV

The basic formula for SaaS LTV is:

LTV = ARPU / Churn Rate

Where:

• ARPU (Average Revenue Per User) = Total revenue / Number of active customers

• Churn Rate = Percentage of customers leaving the platform within a given period

For example, if your SaaS platform has an ARPU of $500 per month and a monthly churn rate of 5%, your LTV calculation would be:

LTV = 500 / 0.05 = 10,000

This means, on average, each customer contributes $10,000 in revenue over their lifetime. The goal for SaaS companies is to increase LTV by improving retention, offering additional revenue-generating services, and reducing churn. Embedded finance can be a key driver in all three of these areas.

How embedded finance can increase LTV & reduce churn

Embedded finance provides a strategic opportunity for SaaS platforms to increase LTV by deepening customer relationships and providing essential financial tools. When customers can handle payments, access credit, or manage finances without leaving the platform, they are far more likely to remain engaged and continue using the software long-term.

For example, imagine a home services SaaS platform that integrates invoicing and payment processing directly into its software. This eliminates the need for contractors and service providers to rely on third-party payment processors, increasing the stickiness of the platform. By embedding financial tools that simplify workflows, SaaS companies can eliminate friction and become an indispensable part of their customers’ operations.

Similarly, offering built-in working capital options gives customers access to essential funds without requiring them to seek external lenders. A salon management SaaS that provides embedded working capital to salon owners ensures users can finance inventory, equipment, and expansion needs without leaving the software. This not only increases retention but also strengthens revenue by adding a new monetizable service.

Additionally, embedding spend management tools directly into the software helps customers monitor spending and make more informed financial decisions. A restaurant SaaS platform that integrates revenue tracking and expense forecasting, for example, positions itself as more than just a tool—it becomes an essential financial hub for its users. Customers who depend on their SaaS provider for both operational efficiency and financial stability spend more time on your platform and are far less likely to churn.

The business benefits of embedded finance for SaaS

Embedded finance provides SaaS platforms with new avenues for growth and differentiation. By integrating financial services into the platform, SaaS companies create an ecosystem where customers rely on them for more than just software, leading to.

1. Increased customer retention – When customers use embedded financial tools, their relationship with the platform grows, making them less likely to switch to a competitor.

2. New revenue streams – By generating revenue from financial services, SaaS companies can reduce dependence on subscription revenue alone. And with no additional CAC to reach these existing customers, the revenue goes straight to the bottom line.

3. Competitive differentiation – By offering financial services, SaaS providers stand out in the market, providing added value many competitors can’t match.

4. Improved user experience – A seamless financial ecosystem eliminates the need for third-party financial tools, reducing friction and enhancing customer satisfaction.

By embedding finance, SaaS platforms transition from software providers to more comprehensive partners in their customers’ growth, ensuring customers stay engaged while driving long-term profitability.

Conclusion & next steps

Incorporating embedded finance into a b2b vertical SaaS platform isn’t just about adding financial services—it’s about building a more valuable, integrated ecosystem that fosters retention, engagement, and long-term revenue growth. When customers can access payments, capital, and financial tools all within one platform, they are far more likely to remain loyal, ultimately increasing LTV and minimizing churn.

Want to explore how embedded finance can maximize your SaaS growth? Learn more about Pipe Capital.