Customer Lifetime Value Calculator
LTV from spend, frequency and churn.
Reviewed by the Calculation Machine team · Updated 24 October 2026 · How we check our maths
Your values
ⓘ Live results
- Lifetime value
- $498.67
- Annual gross profit
- $149.60
- Average lifespan
- 3.3 years
- Lifetime revenue
- $906.67
Quick answer
Customer lifetime value (LTV or CLV) is the gross profit a customer brings in before they leave. A simple version is average order value × orders per year × gross margin ÷ annual churn rate. A customer spending $68 four times a year at a 55% margin, with 30% of customers lost each year, is worth about $499 in gross profit.
What the Customer Lifetime Value calculator does
This calculator estimates how much gross profit an average customer generates over their whole relationship with you. It multiplies yearly spend by your gross margin to get annual profit per customer, then divides by the annual churn rate to estimate how many years a customer stays. It suits subscription businesses, repeat-purchase stores and service companies with recurring clients.
The main use is setting a ceiling on acquisition spend. Divide the lifetime value by your customer acquisition cost to get the LTV:CAC ratio. If you only know monthly cancellations, convert them first with the churn rate calculator, which gives the annual figure this page needs.
The model assumes churn is steady from year to year and does not discount future profit. Both assumptions flatter low-churn businesses: a 10% churn rate implies a 10-year average lifespan, which few companies can actually verify. Treat the result as an estimate to compare segments and channels, not a figure to book as revenue.
The formula
Annual gross profit = AOV × orders per year × margin Average lifespan = 1 ÷ churn LTV = annual gross profit ÷ churn
| Symbol | Meaning | Unit |
|---|---|---|
| AOV | Average order value (or monthly subscription price × 12 with orders per year set to 1) | $ |
| orders per year | How many times an average active customer buys in a year | count |
| margin | Gross margin: revenue minus cost of goods or cost of service, as a share of revenue | % |
| churn | Share of customers lost per year | % |
This is the simple, undiscounted retention model taught in most marketing-metrics texts: with constant churn, the expected customer lifetime is 1 ÷ churn. More rigorous versions discount each year's profit by your cost of capital and use cohort retention curves rather than one churn rate. The LTV:CAC ratio that many investors look at is this LTV divided by the fully loaded cost to win one customer.
Worked examples
Repeat-purchase store
An online coffee and kitchenware shop: $68 average order, four orders a year, 55% gross margin, 30% of customers stop buying each year.
Inputs
- Average order value68 $
- Orders per year4
- Gross margin55 %
- Annual churn rate30 %
Result
- Lifetime value$498.67
- Annual gross profit$149.60
- Average lifespan3.3 years
- Lifetime revenue$906.67
Each customer is worth about $499 in gross profit over roughly 3.3 years. If paid channels cost $150 to win a customer, LTV:CAC is about 3.3:1, within the range most growth teams aim for.
Monthly software subscription
A $40-a-month SaaS plan (12 payments a year), 80% gross margin, 36% annual churn.
Inputs
- Average order value40 $
- Orders per year12
- Gross margin80 %
- Annual churn rate36 %
Result
- Lifetime value$1,066.67
- Annual gross profit$384.00
- Average lifespan2.8 years
- Lifetime revenue$1,333.33
Lifetime value comes to $1,066.67 over about 2.8 years. Cutting annual churn from 36% to 30% would raise it to $1,280, often a cheaper win than raising the price.
Low-loyalty gift shop
A gift retailer with a $35 average order, three orders a year, 40% margin and 60% of buyers never returning the next year.
Inputs
- Average order value35 $
- Orders per year3
- Gross margin40 %
- Annual churn rate60 %
Result
- Lifetime value$70.00
- Annual gross profit$42.00
- Average lifespan1.7 years
- Lifetime revenue$175.00
Lifetime value is only $70, so paying more than about $23 to acquire a customer would fall below a 3:1 ratio. This kind of business usually needs first-order profitability rather than relying on repeat sales.
Turning LTV into an LTV:CAC ratio
LTV:CAC compares what a customer is worth with what it costs to win them. Work out CAC as total sales and marketing spend in a period divided by new customers won in that period, then divide this page's lifetime value by it.
| LTV:CAC | Usual interpretation |
|---|---|
| Below 1:1 | Each new customer loses money over their lifetime |
| 1:1 to 3:1 | Profitable on paper, but thin once overheads are included |
| Around 3:1 | The widely quoted target for subscription and repeat-purchase businesses |
| Well above 5:1 | Healthy unit economics, but you may be under-investing in growth |
Inputs that inflate lifetime value
- Using revenue instead of gross margin. Revenue LTV can be two or three times higher and will justify ad spend you cannot afford. Set margin to 100% only if you deliberately want lifetime revenue.
- Very low churn. At 5% churn the model assumes a 20-year customer. If your business is younger than the implied lifespan, cap the horizon at what you can evidence.
- Blending segments. Customers from referrals and from discount ads often behave very differently. Run the calculator per channel or cohort.
- Counting one-off buyers as churned at the same rate. If most customers buy once and never return, a single churn figure hides that. Look at the share who make a second purchase first.
Monthly churn versus annual churn
This calculator expects annual churn. Do not multiply a monthly rate by 12: 3% monthly churn compounds to about 30.6% a year, not 36%, because each month's losses come from a shrinking base. The annual figure is 1 − (1 − monthly churn)¹². Subscription businesses can also cross-check the result against average monthly revenue per account in the MRR and ARR calculator.
How to use the Customer Lifetime Value Calculator
- 1Enter average order value from your store or billing system (total revenue ÷ number of orders).
- 2Enter how many orders an active customer places per year; for monthly subscriptions enter 12.
- 3Enter gross margin as a percentage — revenue minus product, shipping and payment costs, not net profit.
- 4Enter annual churn: the share of customers at the start of a year who are gone by the end.
- 5Divide the lifetime value by your acquisition cost to get the LTV:CAC ratio.
Frequently asked questions
What is a good LTV to CAC ratio?
Around 3:1 is the commonly cited target. Below 1:1 you lose money on each customer; far above 5:1 can mean you could spend more to grow faster.
Should customer lifetime value use revenue or profit?
Use gross profit when comparing with acquisition cost, because revenue includes the cost of the goods you sold. Revenue-based LTV is fine for forecasting sales but overstates what you can spend to acquire a customer.
How do I calculate LTV without churn data?
Estimate churn from the share of last year's customers who did not buy again this year. If you only know average customer lifespan in years, churn is 1 ÷ lifespan — a 4-year average lifespan is 25% churn.
What is the difference between CLV and LTV?
None in practice; customer lifetime value (CLV or CLTV) and lifetime value (LTV) are names for the same metric. What differs between sources is whether they use revenue or profit and whether they discount future years.
How can I increase customer lifetime value?
Raise order value, purchase frequency or margin, or reduce churn. Churn has the biggest effect because it sits in the denominator: halving churn doubles lifetime value.
References
- Marketing Metrics: The Manager's Guide to Measuring Marketing Performance — Pearson (Farris, Bendle, Pfeifer and Reibstein)
About this calculator
- Built and reviewed by the Calculation Machine team · How we build and test calculators
- Last reviewed: October 24, 2026
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