LTV Calculator
Customer lifetime value (LTV) is the total revenue — or gross profit — one customer brings over the whole relationship.
What is customer lifetime value?
LTV = average order value × orders per year × years as a customer. Multiply by gross margin to get lifetime profit, which tells you how much you can spend to acquire a customer.
How to use the LTV calculator (formula)
What each field means
- Average order value — Average order value.
- Orders per customer per year — Orders per customer per year.
- Customer lifespan (years) — Average years a customer keeps buying.
- Gross margin — Gross margin percentage.
Worked example
Using these numbers: average order value $45.00, orders per customer per year 3, customer lifespan (years) 2.5, gross margin 55%.
The lifetime value (gross profit) is $185.63.
- Lifetime revenue: $337.50
- Revenue per customer per year: $135.00
What is a good LTV?
The key test is LTV versus CAC: lifetime gross profit should be at least 3× CAC.
Tips to improve your result
- Use gross profit LTV for acquisition decisions.
- Retention emails and remarketing raise LTV cheaply.
- Segment LTV by first product purchased.
- Revisit LTV every quarter.
Frequently asked questions
What is the LTV formula?
AOV × purchase frequency × customer lifespan (× gross margin for profit LTV).
LTV vs CAC?
LTV is what a customer is worth; CAC is what it costs to get them.
How does retention affect LTV?
Longer lifespans and more orders per year increase LTV directly.
How do I increase LTV?
Post-purchase flows, loyalty offers, subscriptions and better product quality.
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