Customer lifetime value (LTV) calculator

Customer Lifetime Value (LTV, CLV, or CLTV) represents the total revenue or profit a business can expect from a single customer account throughout the entire relationship. It's the metric that separates brands that scale sustainably from those that burn through cash acquiring customers they cannot afford.

The basic formula is: LTV = Average Order Value x Purchase Frequency x Customer Lifespan. If your average order is $65, customers buy 4 times a year, and they stay for 3 years, your revenue LTV is $780. Multiply by your gross margin to get the profit-based LTV - the number that actually tells you how much you can spend to acquire a customer.

Why LTV is the most important metric in your business

Without knowing your LTV, every acquisition decision is a guess. How much should you spend on Google Ads? What is the right customer acquisition cost (CAC)? Should you invest in retention or acquisition? LTV answers all of these questions. If your LTV is $780 and your CAC is $200, you have a 3.9:1 ratio - healthy room to invest in growth.

The LTV:CAC ratio - your growth compass

The relationship between LTV and CAC is arguably the single most important ratio in marketing economics. Here is how to read it:

• Below 1:1 - You are losing money on every customer. Urgent action required.
• 1:1 to 2:1 - You are breaking even or slightly profitable, but overhead probably wipes out gains.
• 3:1 - The gold standard. Healthy, sustainable growth.
• 5:1+ - You may actually be under-investing in acquisition. Consider scaling budget.

LTV benchmarks by business model

LTV varies dramatically by industry. SaaS companies often see LTVs of $5,000-$50,000+ because of recurring revenue and low marginal costs. E-commerce brands typically range from $150-$1,500 depending on product type and repeat purchase rates. Subscription boxes usually land between $200-$600. The key is not hitting someone else's benchmark - it is ensuring your LTV justifies your acquisition costs with margin to spare.

How to increase customer lifetime value

LTV is driven by three levers. Improving any one of them compounds your returns:

• Increase average order value: Bundles, upsells, cross-sells, and premium tiers push AOV up without increasing acquisition cost.
• Increase purchase frequency: Email marketing, loyalty programs, replenishment reminders, and personalised recommendations bring customers back more often.
• Extend customer lifespan: Better onboarding, proactive customer support, community building, and subscription models keep customers engaged longer.
• Improve margins: Negotiating supplier costs, reducing returns, and optimizing fulfilment directly increase profit-based LTV.
• Reduce churn: For subscription businesses, even a small improvement in retention rate can dramatically increase LTV.

Revenue LTV vs. profit LTV - which should you use?

Revenue LTV is useful for benchmarking and comparing customer segments. But when making acquisition decisions - how much to bid on Google Ads, whether to expand into a new channel, what ROAS target to set - you need profit LTV. It accounts for your margins, giving you the real ceiling on what you can spend per customer without losing money.