Customer lifetime value is the total gross profit a customer generates over the whole relationship, and it is the ceiling on what you can sensibly spend to acquire them. The calculator builds it from four numbers you can read from your own sales data: average order value, how often a customer buys in a year, how many years they stay, and your gross margin. It also shows the maximum acquisition cost for a healthy 3:1 ratio and, if you enter your actual CAC, the ratio you are running today.
Customer Lifetime Value Calculator
Lifetime value tells you how much a customer is worth over the whole relationship, not just the first sale, which is what decides how much you can afford to spend acquiring one. The LTV calculator multiplies the average order value by purchases per year and the number of years a customer stays, then applies your gross margin so the result is profit rather than revenue.
A customer who spends $80 four times a year and stays three years generates $960 of revenue; at a 60% gross margin that is a lifetime value of $576. The calculator also shows the most you should pay to acquire such a customer if you want a 3:1 ratio ($192 here) and, if you enter your actual acquisition cost, the ratio you are achieving. Increasing frequency or retention usually moves LTV more than a higher order value does.
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Frequently Asked Questions
Should LTV use revenue or profit?
Profit. A customer who brings $960 of revenue at a 60% margin is worth $576 to you, and that is the figure to compare with acquisition cost. Some marketing dashboards report revenue LTV, which overstates what you can spend.
How do I estimate customer lifespan?
Divide 1 by your annual churn rate. If 30% of customers leave each year the average lifespan is about 3.3 years. For subscription businesses use monthly churn and divide by 12.
How can I increase lifetime value?
Raise purchase frequency and retention first (email programmes, loyalty schemes, better onboarding), then order value (bundles, upgrades), then margin. Retention changes usually move LTV more than pricing does.
