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Customer Lifetime Value Calculator – LTV

Quick answer

LTV = avg order value × purchases/year × years.

  • $62 × 6 × 3 = $1,116.
  • Compare to CAC for growth health.

Figures are estimates from this calculator’s standard formula — adjust the inputs in the tool below for your exact number.

How Customer Lifetime Value Works

LTV = Average Order Value × Purchase Frequency × Customer Lifespan

Lifetime value projects everything a customer will ever spend with you. Multiply average order value by purchases per year and by the years a typical customer stays. Worked example: a $62 average order placed 6 times a year for a 3-year lifespan gives LTV = 62 × 6 × 3 = $1,116. For margin-based decisions multiply again by gross margin — at 40% that is $446 of contribution. If acquiring a customer costs $80, the 5.6:1 contribution ratio says scale the channel hard.

  1. 1

    Enter AOV

    Revenue ÷ orders over the last 12 months.

  2. 2

    Enter frequency and lifespan

    Orders per year and average retention years.

  3. 3

    Read LTV

    Raw LTV plus gross-margin LTV.

Use Cases

Ad spend ceilings

Cap CAC at one-third of margin-adjusted LTV per channel.

Retention investment

Justify loyalty program cost against the LTV it multiplies.

Segment tiering

Build VIP treatment for the top 20% by projected LTV.

Common Mistakes

  • Using revenue LTV to justify CAC spending that margin cannot carry

  • Projecting 5-year lifespans when your data covers 18 months

  • Averaging LTV across one-time buyers and subscribers

FAQs

Should LTV use revenue or margin?

Use gross margin for spending decisions — revenue overstates what a customer contributes.

What LTV:CAC ratio is healthy?

3:1 is the classic floor; below 1.5:1 you are buying revenue at a loss.

How do I extend lifespan?

Loyalty programs, subscriptions and post-purchase email lift repeat rate, which multiplies LTV directly.

Does LTV apply to one-time purchases?

With lifespan under a year, LTV ≈ AOV × margin — focus on referrals instead of retention.

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