Customer Lifetime Value Calculator

Estimate customer lifetime value from repeat purchases or subscription churn, in revenue and gross profit, and compare it with your CAC.

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Results will appear here once you enter your values.

How Customer Lifetime Value Is Calculated

Customer lifetime value (CLV, often shortened to LTV) is the total a typical customer is worth to you before they stop buying. This calculator offers the two formulas most teams actually use, because the right one depends on how customers pay you.

  • Repeat purchases: LTV = average order value × purchases per year × lifespan in years. A store with a $65 average order, 4 orders a year and a 3-year customer life has a revenue LTV of 65 × 4 × 3 =780.
  • Subscriptions: LTV = monthly ARPU × gross margin ÷ monthly churn. At 49 a month, 60% margin and 3% monthly churn, LTV is49 × 0.60 ÷ 0.03 = $980. Dividing by churn works because a customer's expected lifetime is 1 ÷ churn, here 33.3 months.
  • Gross margin: both modes also show gross-profit LTV. The $780 store customer is worth $468 in gross profit at a 60% margin, and that is the number that pays for acquisition.

If you enter a customer acquisition cost, the tool divides gross-profit LTV by CAC to give the LTV:CAC ratio, and divides CAC by monthly gross profit per customer to show how many months it takes to earn the acquisition cost back.

Why LTV:CAC Matters

LTV on its own tells you what a customer is worth; LTV:CAC tells you whether you can afford to get more of them. David Skok's widely cited SaaS Metrics 2.0 framework suggests an LTV:CAC of at least 3 and recovering CAC in under 12 months as signs of a healthy business model. The calculator labels ratios below 1 as loss-making, 1 to 3 as thin, 3 to 5 as healthy, and above 5 as a sign you could probably spend more on growth.

  • Budget ceilings: with a 468 gross-profit LTV and a 3:1 target, you can pay up to about156 to acquire a customer.
  • Channel decisions: run the numbers per channel. Customers from referrals often churn less than customers from discount ads, so their LTV is higher even at the same order value.
  • Cash flow: a strong ratio with a 30-month payback can still strain cash, because you pay for acquisition up front and collect the profit slowly.

Common Mistakes to Avoid

  • Using revenue LTV against CAC: a 780 revenue LTV looks like a 5:1 ratio against a150 CAC, but on gross profit it is 3.1:1. Compare profit with cost.
  • Mixing time units: monthly ARPU must be paired with monthly churn. Using annual churn of 30% with monthly ARPU overstates lifetime by about 12 times.
  • Treating churn as fixed: churn is usually highest in the first few months. A blended churn from a young cohort can make LTV look far smaller, or far larger, than it will turn out.
  • Assuming a long lifespan you have not observed: if your business is two years old, a five-year lifespan is a guess. Use the lifespan your cohort data supports and revisit it.

The formulas here are simple averages. They ignore discounting, expansion revenue and upsells, which a cohort-based model would capture.

Tips for Better Estimates

  • Calculate by segment: run the calculator separately for each plan, product line or acquisition channel instead of one company-wide average.
  • Use net figures for order value: subtract returns, refunds and discounts from average order value before entering it.
  • Take margin after cost to serve: for software, include hosting, payment fees and support; for physical products, include shipping and fulfilment.
  • Recheck quarterly: churn and purchase frequency drift as your customer mix changes, so update the inputs as new data arrives.

Pair this tool with the CAC calculator to measure acquisition cost from your own spend, and with the ROAS calculator to see how individual ad campaigns contribute.

Frequently Asked Questions

Common questions about the Customer Lifetime Value Calculator

For repeat-purchase businesses, LTV = average order value × purchases per year × customer lifespan in years. For subscriptions, LTV = monthly ARPU × gross margin ÷ monthly churn rate. Multiply revenue LTV by gross margin to get the profit a customer contributes.

Sources & References

SaaS Metrics 2.0: A Guide to Measuring and Improving What Matters (David Skok, For Entrepreneurs)

Source of the LTV:CAC of 3 or more and under-12-month CAC payback benchmarks, and of churn-based LTV.
→Source: For Entrepreneurs (David Skok)

Customer lifetime value (Wikipedia)

Overview of customer lifetime value definitions and the retention-based LTV formula.
→Source: Wikipedia

Churn rate (Wikipedia)

Churn rate definition and the relationship between churn and expected customer lifetime (1 ÷ churn).
→Source: Wikipedia

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