Marketing
Customer Lifetime Value Calculator
What an average customer is worth over the whole relationship — for ecommerce or subscription businesses. Switch between revenue and profit, add your acquisition cost, and see whether your LTV:CAC ratio clears the 3:1 benchmark.
Purchase behaviour
$
What a customer spends in one order
How often they buy in a year
How long they keep buying before churning
%
Share of revenue left after cost of goods
$
What you spend to win one customer — unlocks LTV:CAC
Customer lifetime value · profit
$324.00
After cost of goods over an average 3-year relationship
LTV:CAC 8.1 : 1 — Under-investing
A high ratio looks great, but may mean you are under-spending on growth and leaving market share on the table.
How it builds up
- Annual revenue / customer$60.00 × 4 = $240.00
- Lifespan3 years
- Lifetime revenue$720.00
- × 45% margin$324.00
Max CAC (3:1)
$108.00
Payback
4.4 mo
Monthly profit
$9.00
Try an example
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The basics
What is customer lifetime value?
Lifetime value (LTV, or CLV) is the total worth of an average customer across the entire time they stay with you. It is the single most useful number in marketing, because it sets the ceiling on what you can afford to spend to win a customer. Measure it two ways — and they answer different questions.
LTV = AOV × frequency × lifespan
Revenue LTV
The top-line version: everything a customer spends with you over their lifetime. Good for sizing a market, but it ignores what it costs you to serve them.
$60 × 4/yr × 3 yr = $720
Profit LTV = revenue LTV × margin
Profit LTV
Revenue scaled by gross margin — the value that actually lands in your pocket. This is the number you compare against acquisition cost, never the revenue figure.
$720 × 45% = $324
Method
How to calculate LTV by hand
Four steps. The first depends on whether you sell one-off or on subscription; the rest are the same.
- 1
Find revenue per customer per year
For ecommerce, multiply average order value by purchases per year. For subscriptions, annualise the average revenue per user (ARPU).
AOV × purchases/yr · or ARPU × 12 - 2
Estimate the customer lifespan
How many years an average customer stays. For subscriptions this falls straight out of churn: lifespan = 1 ÷ churn rate.
lifespan = 1 ÷ churn - 3
Multiply to get lifetime revenue
Annual revenue per customer times their lifespan gives total lifetime revenue.
revenue/yr × lifespan = lifetime revenue - 4
Scale to profit with your margin
Multiply by gross margin to turn revenue into profit LTV — the figure to weigh against acquisition cost.
lifetime revenue × gross margin
Worked examples
LTV across business models
The same logic covers a clothing store, a SaaS app, and a subscription box — only the first step changes.
Given AOV $60 · 4 orders/yr · stays 3 yrs · 45% margin
Revenue per year: $60.00 × 4 = $240.00
Over 3 years: $240.00 × 3 = $720.00
Profit at 45% margin: $720.00 × 45% = $324.00
LTV = $324.00 (profit)
The benchmark
Reading your LTV:CAC ratio
LTV on its own is just a number. Divided by what it costs to acquire a customer (CAC), it becomes a verdict on whether your growth is sustainable. Here is how to read the ratio.
< 1 : 1
Losing money
Each customer costs more than they return. Unsustainable.
1–3 : 1
Thin margin
Profitable, but little room for overhead and slow payback.
3–5 : 1
Healthy
The sweet spot — efficient, scalable, well-funded growth.
> 5 : 1
Under-investing
Great economics, but you may be starving growth of spend.
Quick chart
What is my LTV at each churn rate?
For a subscription business, churn is destiny. Set your ARPU and margin, then read lifetime value straight off your monthly churn rate.
Lifespan = 1 ÷ monthly churn
| Monthly churn | Avg. lifespan | Revenue LTV | Profit LTV |
|---|---|---|---|
| 1% | 100 mo · 8.3 yr | $3,000.00 | $2,400.00 |
| 2% | 50 mo · 4.2 yr | $1,500.00 | $1,200.00 |
| 3% | 33.3 mo · 2.8 yr | $1,000.00 | $800.00 |
| 4% | 25 mo · 2.1 yr | $750.00 | $600.00 |
| 5% | 20 mo · 1.7 yr | $600.00 | $480.00 |
| 6% | 16.7 mo · 1.4 yr | $500.00 | $400.00 |
| 7% | 14.3 mo · 1.2 yr | $428.57 | $342.86 |
| 8% | 12.5 mo · 1 yr | $375.00 | $300.00 |
| 10% | 10 mo · 0.8 yr | $300.00 | $240.00 |
| 12% | 8.3 mo · 0.7 yr | $250.00 | $200.00 |
| 15% | 6.7 mo · 0.6 yr | $200.00 | $160.00 |
| 20% | 5 mo · 0.4 yr | $150.00 | $120.00 |
Lower churn compounds hard: halving churn roughly doubles every customer's lifetime value.
Where it matters
Why LTV runs the business
One number quietly governs how much you spend, what you charge, and where you invest.
max CAC = LTV ÷ 3
Acquisition budgets
LTV sets the ceiling on bids and budgets. Knowing it, you can spend confidently up to your target ratio instead of guessing.
retention > acquisition
Retention strategy
Because lifespan is the reciprocal of churn, small retention wins compound into outsized LTV gains — often cheaper than chasing new customers.
LTV by cohort
Segmentation
Splitting LTV by channel or plan reveals which customers are worth chasing and which quietly lose money, sharpening every spend decision.
Worth knowing
Pitfalls and rules of thumb
The formula is simple; the mistakes are predictable. A handful of rules keep your LTV honest.
use profit, not revenue
Don't flatter the number
Comparing revenue LTV to CAC overstates how much room you have. Always margin-adjust before you judge a ratio.
lifespan = 1 ÷ churn
Churn is the lever
Lifespan responds non-linearly to churn. A point of retention is worth far more than a point of price at the same effort.
discount future cash
Money has a time value
Revenue years away is worth less than revenue today. Rigorous LTV applies a discount rate; for fast estimates most teams skip it.
segment, don't average
Averages hide trouble
A single blended LTV can mask a loss-making channel propped up by a great one. Always look at LTV by cohort before you scale spend.
include all revenue
Count expansion, not just first sale
Upsells, renewals, and repeat orders all belong in LTV. Counting only the first purchase understates a customer badly.
match the period
Keep ARPU and churn aligned
If ARPU is monthly, churn must be monthly too. Mixing a monthly rate with annual revenue is the most common LTV error.
Reference
The inputs, defined
Every figure that feeds the formula, and how to measure it.
- Average order value (AOV)
- Total revenue ÷ number of orders over a period. The typical amount a customer spends in one transaction.
- Purchase frequency
- Orders ÷ unique customers, annualised. How many times an average customer buys in a year.
- ARPU
- Average revenue per user, per month or year. For subscriptions, total recurring revenue ÷ active customers.
- Churn rate
- The share of customers who cancel each period. Lifespan is its reciprocal: 1 ÷ churn.
- Customer lifespan
- The average number of years a customer keeps buying before leaving. Often estimated as 1 ÷ annual churn.
- Gross margin
- Share of revenue left after the cost of goods or service. Converts revenue LTV into profit LTV.
- CAC
- Customer acquisition cost — total sales and marketing spend ÷ new customers won in the same period.
FAQ
Common questions
Customer lifetime value — also called CLV or LTV — is the total revenue, or gross profit, you expect from an average customer across the whole time they stay with you. It tells you how much a customer is worth, which sets the ceiling on what you can afford to spend to acquire one.
For a one-off or ecommerce business, multiply average order value by purchases per year and by the number of years a customer stays: LTV = AOV × purchases/yr × lifespan. For a subscription business, divide ARPU by your churn rate: LTV = ARPU ÷ churn. To measure profit instead of revenue, multiply the result by your gross margin.
For recurring revenue, lifespan equals 1 ÷ churn rate, so LTV = ARPU ÷ churn. At a $30 monthly ARPU and 3% monthly churn, the average customer stays 1 ÷ 0.03 ≈ 33 months and is worth about $1,000 in revenue, or $800 in profit at an 80% margin.
For comparing against acquisition cost, use profit (the margin-adjusted version). Revenue LTV overstates a customer's worth because it ignores the cost of serving them. Multiplying revenue LTV by your gross margin gives profit-based LTV — the figure you actually weigh against CAC.
A widely used benchmark is an LTV:CAC ratio of 3:1 — each customer should be worth about three times what you spend to acquire them. Below 1:1 you lose money on every customer. Between 1:1 and 3:1 is profitable but thin. Far above 5:1 can mean you are under-investing in growth and leaving market share on the table.
Lifespan is the reciprocal of churn, so the relationship is non-linear. Cutting monthly churn from 5% to 2.5% more than doubles average lifespan, and therefore more than doubles LTV — even though revenue per customer hasn't changed. Retention is the highest-leverage input in the formula.
None — they are the same metric. CLV (customer lifetime value) and LTV (lifetime value) are used interchangeably. Some teams reserve CLTV for a more rigorous, discounted version, but in everyday use all three names mean the value of an average customer over their lifetime.
CAC payback is the number of months it takes a customer's gross profit to repay what you spent to acquire them: payback = CAC ÷ monthly gross profit per customer. Under 12 months is generally considered efficient for subscription businesses.
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Ugo CharlesBuilt and fact-checked against our editorial standards · Last updated June 2026
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