LTV Calculator
Each customer is worth ~$720 over 3 years. Keep CAC under $240.
What is LTV?
Customer lifetime value (LTV) is the total gross revenue you expect from a customer over the time they stay with you, estimated here as average order value times orders per year times lifespan in years.
It turns three numbers you usually know, what a customer spends, how often, and for how long, into a single figure that says what a customer is worth.
LTV is most useful as the ceiling on acquisition. The standard guide is to keep customer acquisition cost under a third of LTV, so the number tells you how much you can afford to spend winning a customer.
How to calculate LTV
LTV = AOV × Orders/yr × Lifespan
- Find your average order value. Take total revenue over a period and divide by the number of orders. Here it is 60.
- Count orders per year. Work out how many times a typical customer buys in a year. The example uses four.
- Estimate customer lifespan. How many years the average customer stays before they leave. The example uses three.
- Multiply the three together. AOV times orders per year times lifespan. 60 times 4 times 3 is an LTV of 720.
Worked example
A customer spends 60 an order, buys four times a year, and stays for three years.
| Average order value | $60 |
|---|---|
| Orders per year | 4 |
| Customer lifespan (years) | 3 |
| Result | $720 LTV |
Each customer is worth about 720 in gross revenue. Revenue per year is 240, and to keep the standard 3:1 cushion you would hold acquisition cost under 240.
How to improve LTV
- Lift average order value with bundles, upsells and higher tiers, so each purchase counts for more.
- Increase purchase frequency with reorder reminders, subscriptions and loyalty offers.
- Extend lifespan by cutting churn: better onboarding, support and a reason to stay.
- Track LTV by cohort, not as one blended figure, so you can see whether newer customers are worth more or less.
Guides
- How to calculate LTVThe simple formula multiplies three numbers you already have. The skill is using gross profit, not revenue, and reading the result against what you paid to acquire the customer.7 min read
- What is a good LTV?There is no universal good LTV number. It is good only relative to acquisition cost, measured on profit, and when it is rising.7 min read
Frequently asked questions
- What is customer lifetime value and how do you calculate it?
- Customer lifetime value (LTV) is the total gross revenue you expect from a customer across the whole time they stay with you. One simple way to estimate it is average order value times orders per year times customer lifespan in years. An AOV of 60, four orders a year and a three-year lifespan works out to 720.
- What is a good LTV?
- There is no universal good LTV, because the figure only means something next to your acquisition cost. The useful test is the relationship: most operators keep customer acquisition cost (CAC) under a third of LTV, so the higher your LTV, the more you can afford to spend winning each customer. Judge LTV against CAC, not against a target number.
- What is the difference between LTV and AOV?
- Average order value (AOV) is what a customer spends in a single order; LTV is what they spend across every order over their lifetime. AOV is one of the inputs to LTV, alongside how often they buy and how long they stay. Raising any of the three raises LTV.
- Should LTV use revenue or profit?
- This calculator estimates gross-revenue LTV, the total a customer pays you. Some teams prefer gross-profit LTV, which multiplies that figure by gross margin to reflect what you actually keep. Use the profit version when you compare LTV to CAC, since acquisition is paid out of margin, not revenue.
- How can you increase customer lifetime value?
- You have three levers: order value, purchase frequency and lifespan. Raise order value with bundles and upsells, raise frequency with reorder prompts and subscriptions, and extend lifespan by reducing churn through better onboarding and support. A small gain in each compounds in the LTV figure.