Customer Lifetime Value Calculator
Enter how customers buy (order value, frequency, margin, lifespan) and what you pay to acquire them, to see lifetime value, the LTV:CAC ratio and payback period.
How to use the customer lifetime value calculator
- Enter your average order value and how often a typical customer buys per year.
- Set your gross margin — LTV based on revenue flatters every business model.
- Estimate how many years a customer stays active (churn data, if you have it).
- Enter your acquisition cost to see whether the economics actually work.
Formula
About this calculator
Customer lifetime value reframes acquisition from "what does a sale cost" to "what does a relationship earn." A business with a $60 product and no repeat purchases has a very different tolerance for acquisition costs than one where the average customer returns six times a year — even at identical prices. LTV is the number that explains why some companies can outbid everyone on ads and still profit.
The pairing that matters is LTV:CAC. The widely used healthy range is 3:1 — customers contribute about three times what they cost to win. Below 1:1 you are buying revenue at a loss; above 5:1 usually means you are underinvesting in growth and could acquire more aggressively. Payback period matters just as much for cash flow: an 18-month payback needs capital runway that a 3-month payback does not.
The levers differ in power. Extending lifespan and raising purchase frequency usually beat shaving acquisition cost, because they compound across the whole base, not just new cohorts. This is also why churn is the silent killer: cutting monthly churn from 5% to 3% can nearly double LTV without touching marketing at all.
Frequently asked questions
What is a good LTV:CAC ratio?
Around 3:1 is the standard healthy benchmark. Below 1:1 means acquisition loses money outright; far above 5:1 often signals you could spend more on growth.
Should LTV use revenue or profit?
Profit (gross margin). Revenue-based LTV overstates what customers contribute and leads to overspending on acquisition, especially at low margins.
How do I estimate customer lifespan?
For subscriptions, lifespan ≈ 1 ÷ monthly churn rate (a 4% monthly churn implies 25 months). For transactional businesses, use repeat-purchase cohorts or industry data.
How do I increase LTV?
In rough order of impact: reduce churn, increase purchase frequency (subscriptions, replenishment), raise average order value (bundles, upsells), and improve margin.