LTV Calculator
CheckedThe LTV calculator estimates customer lifetime value from order value, purchase frequency and lifespan, in revenue and in gross profit. Free, no sign-up, and the result updates as you type.
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Revenue LTV is a vanity number. A $544 lifetime value looks like room to spend $150 acquiring a customer, right up until you remember that $316 of it goes straight back out as product cost, fees and shipping. The number that can actually pay for advertising is the gross-profit LTV, and it is the only one worth putting next to CAC. This calculator returns both, so the gap between them is visible before you set a bid.
How it's calculated
LTV = average order value × purchases per year × lifespan in years Gross-profit LTV = LTV × margin ÷ 100
LaTeX source
\text{LTV} = \text{AOV} \times f \times L \qquad \text{LTV}_{\text{profit}} = \text{LTV} \times \frac{m}{100} Worked examples
A homewares store with repeat buyers
$544.00 revenue LTV, $228.48 gross-profit LTV
$68 × 3.2 orders a year × 2.5 years is 8 lifetime orders and $544 of revenue. At a 42% gross margin only $228.48 of that is ever yours, which is $28.56 per order. A $150 CAC looks like a 3.6x return against revenue and a thin 1.5x against profit.
The numbers used
- Average order value
- 68
- Purchases per year
- 3.2
- Customer lifespan
- 2.5
- Gross margin
- 42
A $24 monthly consumable subscription
$432.00 revenue LTV, $237.60 gross-profit LTV
Eighteen shipments at $24 is $432. The 55% margin leaves $237.60, or $13.20 of gross profit per box. Subscriptions reach a high order count on a low AOV, which is why frequency matters more than basket size once a customer sticks.
The numbers used
- Average order value
- 24
- Purchases per year
- 12
- Customer lifespan
- 1.5
- Gross margin
- 55
Questions sellers ask
How do I calculate LTV?
Multiply average order value by how often a customer buys per year, then by how many years they stay. An $68 AOV at 3.2 orders a year for 2.5 years is $544. Then multiply by your gross margin to get the figure that can fund acquisition — at 42% that $544 becomes $228.48. Report the profit version internally and the revenue version never.
How do I calculate customer lifetime value?
The same three inputs: order value, purchase frequency and lifespan. If you do not know lifespan, derive it from churn — 4% monthly churn means an average customer lasts 25 months, or about 2.1 years. Use a rolling 12-month window for AOV and frequency rather than all-time figures, because a store's basket size drifts and old cohorts flatter the average.
What is customer lifetime value?
It is the total money one customer brings in across their whole relationship with you, not just their first order. It matters because acquisition is paid for once and repaid over many purchases, so a business with repeat buyers can outbid one without them on the same first-order economics. Measured in gross profit rather than revenue, it is the ceiling on what a customer is worth acquiring.
What is a good customer LTV?
There is no absolute threshold — LTV only means something next to CAC. A $200 LTV is excellent if customers cost $40 to acquire and ruinous if they cost $180. The ratio to aim for is roughly 3:1 gross-profit LTV to CAC, which leaves room for fixed costs after acquisition is paid for.
What is a good CLV to CAC ratio?
Three to one on gross-profit LTV is the usual benchmark. Below 3:1 there is rarely enough left after overheads; far above 3:1 usually means you are underspending on growth rather than running a great business. Check the ratio is built on margin-adjusted LTV, because a 3:1 revenue ratio at a 40% margin is really 1.2:1 and barely breaks even.
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