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Marketing • Retention • Unit Economics

LTV Calculator

Estimate what an average customer is really worth over their entire relationship with your business — not just their first purchase — using order value, purchase frequency and customer lifespan.

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Why Use This LTV Calculator?

  • ✓ Estimates Customer Lifetime Value (LTV) from purchase behavior.
  • ✓ Factors in gross margin for a profit-based LTV, not just revenue.
  • ✓ Pairs directly with the CAC Calculator to check your LTV:CAC ratio.
  • ✓ No account needed — just enter your customer data.

On This Page

LTV Calculator Formula Quick Reference Key Terms Explained Where It's Used Worked Examples Tips & Mistakes FAQs

LTV Calculator

Converts your entered amounts between currencies at an approximate exchange rate.
$
Average amount spent per purchase.
#
How many times an average customer buys per year.
yrs
How many years an average customer stays active.
%
Leave at 100 to calculate revenue-based LTV instead of profit-based.

About LTV Calculator

Customer Lifetime Value estimates the total profit (or revenue) an average customer generates over their entire relationship with your business — the number that should guide how much you're willing to spend to acquire them.

Results

Customer Lifetime Value (LTV)
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Annual Value / Customer
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Lifetime Revenue
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Max Recommended CAC
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Summary

Enter values to see your results.

LTV Calculator Formula

Annual Value per Customer

Average Order Value × Purchase Frequency (per year)

Lifetime Revenue

Annual Value × Customer Lifespan (years)

Customer Lifetime Value (LTV)

Lifetime Revenue × Gross Margin %

Max Recommended CAC

LTV ÷ 3 — keeping you at or above a healthy 3:1 LTV:CAC ratio

Quick Reference

Business ModelTypical Lifespan Used
E-commerce (repeat purchase)1 – 3 years
Subscription / SaaS2 – 5 years
B2B services / agencies2 – 6 years
Local retail / hospitality1 – 2 years

What Increases LTV

  • Higher purchase frequency through retention programs.
  • Upsells and cross-sells raising average order value.
  • Reducing churn so customers stay active longer.

Choosing a Lifespan Estimate

  • Use 1 ÷ annual churn rate for subscription businesses.
  • Use historical repeat-purchase data for e-commerce.
  • When in doubt, use a conservative (shorter) estimate.

Key Terms Explained

LTV combines three customer behaviors into one number that should guide your acquisition spend.

🧾 Average Order Value (AOV)

  • The average amount a customer spends per transaction.
  • Raised by upsells, bundles and cross-sells.
  • Use your actual historical average, not a target.

🔁 Purchase Frequency

  • How many times an average customer buys per year.
  • Higher frequency compounds LTV significantly over time.
  • For subscriptions, this is typically fixed by the billing cycle.

📅 Customer Lifespan

  • How long an average customer keeps buying before churning.
  • For subscriptions: roughly 1 ÷ monthly or annual churn rate.
  • The most impactful — and hardest to estimate — input in the formula.

💰 Gross Margin

  • Converts revenue-based LTV into profit-based LTV.
  • Set to 100% to see pure revenue LTV instead.
  • Profit-based LTV is the more honest number to compare against CAC.

Where LTV Is Used

🎯 Setting a Max CAC

Use LTV ÷ 3 as a ceiling for how much you're willing to spend to acquire a customer.

📈 Investor Reporting

LTV alongside CAC is core unit economics investors expect in growth-stage pitches.

🛍️ E-Commerce Retention

See how much retention programs and loyalty perks are worth in dollar terms.

📣 Marketing Budget Allocation

Compare LTV by acquisition channel to see which channels bring the most valuable customers.

🧮 Pricing & Packaging

Model how a price increase or new bundle changes lifetime value.

🤝 Customer Success Prioritization

Identify high-LTV segments worth extra retention investment.

Worked Examples

Example 1 — Subscription Box

AOV $60, 4 purchases/year, 3-year lifespan, 60% margin → Annual value $240, Lifetime revenue $720, LTV $432, Max CAC ≈$144.

Example 2 — SaaS Business

AOV $50/month billed monthly → treat as AOV $50, frequency 12/year, 3-year lifespan, 80% margin → Lifetime revenue $1,800, LTV $1,440, Max CAC ≈$480.

Example 3 — Local Retail

AOV $35, 6 purchases/year, 1.5-year lifespan, 40% margin → Lifetime revenue $315, LTV $126, Max CAC ≈$42.

Best Practices & Common Mistakes

✅ Best Practices

  • Use profit-based LTV (with gross margin) rather than revenue alone.
  • Base lifespan on your actual churn or repeat-purchase data, not a guess.
  • Recalculate LTV whenever pricing, retention or margin changes materially.
  • Segment LTV by acquisition channel or customer type for sharper decisions.
  • Pair LTV with CAC — neither number means much alone.

❌ Common Mistakes

  • Using revenue instead of profit, which overstates how much you can spend to acquire customers.
  • Guessing customer lifespan instead of calculating it from churn data.
  • Ignoring how AOV and frequency shift after a pricing change.
  • Applying one blended LTV to every channel instead of segmenting.
  • Treating LTV as a fixed number instead of revisiting it quarterly.

Frequently Asked Questions

LTV estimates the total profit or revenue an average customer generates over their entire relationship with your business, not just their first purchase.
For subscription businesses, divide 1 by your churn rate (e.g. 2% monthly churn ≈ 50-month lifespan). For repeat-purchase businesses, use historical data on how long customers keep buying.
Profit-based LTV (using gross margin) gives a more honest picture of what a customer is actually worth, since it accounts for the cost of delivering your product or service.
3:1 is the most commonly cited healthy benchmark — meaning a customer should be worth roughly three times what it costs to acquire them.
Quarterly is typical, or whenever pricing, churn, or margins change meaningfully.
Yes — set purchase frequency and lifespan to reflect how often (if at all) customers make repeat purchases; for true one-time purchases, use a frequency and lifespan of 1.

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