Customer Lifetime Value (LTV) Calculator
Calculate customer lifetime value from average order value, purchase frequency, retention, and gross margin. Runs in your browser.
Lifetime value
- Revenue per customer
- $1,620.00
- Customer lifetime value (LTV)
- $1,134.00
- Monthly value per customer
- $63.00
LTV = average order value × purchases/month × retention months × gross margin. Using gross margin (not revenue) gives the profit a customer generates — the right figure to compare against CAC. Retention months ≈ 1 ÷ monthly churn rate. Informational.
About this tool
Customer Lifetime Value (LTV, sometimes CLV) is the total profit a customer generates over their entire relationship with your business. This calculator builds it from four inputs: average order value, how often they buy per month, how many months they stay (retention), and your gross margin. Multiplying the first three gives lifetime revenue; applying gross margin converts that to profit — and using margin rather than revenue is the key subtlety, because LTV is only meaningful for decision-making when it reflects the actual profit a customer delivers, which is what you compare against acquisition cost (CAC). Retention months can be estimated as roughly one divided by your monthly churn rate, so reducing churn directly extends lifetime and lifts LTV. Knowing LTV tells you how much you can afford to spend to acquire a customer (aim for LTV at least 3× CAC), where to invest in retention, and which segments are most valuable. The model assumes steady purchasing and margin; discounting future cash flows or modeling changing behavior would refine it. It is informational, not financial advice. Everything runs in your browser.
How to use it
- Enter the average order value.
- Enter purchases per month and average retention in months.
- Enter your gross margin percentage.
- Read the LTV — then compare it to your CAC (aim for 3:1 or better).
Frequently asked questions
- How is LTV calculated?
- Average order value × purchases per month × retention months × gross margin. The first three give lifetime revenue; multiplying by gross margin converts it to the profit a customer generates, which is the figure to compare against CAC.
- Why use gross margin instead of revenue?
- Because revenue includes the cost of delivering the product. LTV is meant to represent profit, so you can judge whether a customer is worth more than they cost to acquire and serve. Revenue-based LTV overstates value and can justify overspending on acquisition.
- How do I estimate retention months?
- A common approximation is 1 ÷ monthly churn rate. If 5% of customers churn each month, average retention is about 1 ÷ 0.05 = 20 months. Lowering churn lengthens lifetime and directly raises LTV.
- What is a healthy LTV:CAC ratio?
- At least 3:1 is the widely cited benchmark — a customer should be worth three or more times what they cost to acquire. The LTV:CAC tool computes this directly once you have both figures.
- Does this discount future value?
- No — it sums nominal lifetime profit. More sophisticated models discount future cash flows (since a dollar later is worth less) and account for changing purchase behavior. For most planning, the straightforward LTV here is a solid estimate.
- Is this financial advice?
- No. It is an informational metric. Use it with CAC, churn, and margins for decisions.