Customer Lifetime Value (LTV) Calculator
Calculate customer lifetime value from order value, purchase frequency, margin and lifespan. See annual margin per customer and your LTV to CAC ratio instantly.
Updated 2026-06-14 · Free · No sign-up · Runs privately in your browser
Show the formula & steps
How the Customer LTV Calculator Works
Customer lifetime value (LTV or CLV) is the total gross profit you expect from a single customer across the entire relationship. This calculator builds it from four inputs — average order value, purchase frequency, gross margin, and customer lifespan — and then compares it to your customer acquisition cost (CAC) to show the all-important LTV:CAC ratio.
The Formula
LTV = AOV × purchases per year × gross margin % × lifespan (years)
Multiplying by the gross margin converts revenue into the profit you actually keep. Dividing LTV by CAC then tells you how many times over each customer pays back the cost of winning them.
Worked Example
For a customer who spends $60 per order, buys 4 times a year, at a 50% margin, for 3 years, with an $80 CAC:
- Annual margin per customer = 60 × 4 × 0.50 = $120
- LTV = $120 × 3 years = $360
- LTV:CAC = 360 ÷ 80 = 4.5 : 1
A 4.5:1 ratio is comfortably above the 3:1 benchmark, suggesting acquisition spend is paying off well.
Reading the LTV:CAC Ratio
| LTV : CAC | What it usually means |
|---|---|
| Below 1 : 1 | Losing money on each customer |
| 1 : 1 to 3 : 1 | Profitable but room to improve |
| About 3 : 1 | Healthy, sustainable growth |
| Above 5 : 1 | Strong unit economics, possibly underspending on growth |
Improve LTV by raising order value, increasing repeat purchases, widening margins, or extending how long customers stay — each lever multiplies directly into the result.
Frequently asked questions
What is customer lifetime value (LTV)?+
Customer lifetime value is the total gross profit a business expects to earn from one customer over the whole relationship. It combines how much they spend per order, how often they buy, your profit margin on those sales, and how many years they stay a customer, giving a single figure you can compare against acquisition cost.
How do I calculate customer LTV?+
Multiply the average order value by the number of purchases per year, then by your gross margin as a decimal, then by the average customer lifespan in years. For example, a $60 order, 4 times a year, at 50% margin, for 3 years gives 60 × 4 × 0.5 × 3 = $360 of lifetime gross profit.
What is a good LTV to CAC ratio?+
A healthy benchmark is an LTV to CAC ratio of about 3 to 1, meaning each customer is worth roughly three times what it costs to acquire them. A ratio near 1 to 1 means you barely break even, while a very high ratio can signal you are underinvesting in growth.
Should LTV use revenue or profit?+
Use gross profit, not revenue. Multiplying by your gross margin turns total spending into the money you actually keep after the cost of goods, which is the figure that should be compared against acquisition and servicing costs. Revenue-based LTV overstates a customer's real value.
How do I estimate customer lifespan?+
If you know your annual churn rate, lifespan in years is roughly 1 divided by the churn rate, so a 25% annual churn implies about a 4-year average lifespan. Otherwise estimate it from historical retention data or the average time customers stay active before they stop buying.