Customer Lifetime Value Calculator
This customer lifetime value calculator multiplies average order value by purchase frequency and customer lifespan to value the full relationship — then applies your gross margin and compares the result to acquisition cost as the classic LTV:CAC ratio. Knowing lifetime value tells you exactly how much you can afford to spend acquiring a customer.
Average revenue per order.
How many times the average customer buys per year.
How many years the average customer keeps buying.
Gross margin % applied to lifetime revenue for lifetime gross profit.
Your customer acquisition cost, for the LTV:CAC ratio.
Lifetime gross profit
540
- Lifetime revenueAOV × orders per year × lifespan.
- 900
- Total orders in lifetime
- 12
- LTV : CAC ratioLifetime gross profit per dollar of acquisition cost. 3:1+ is the classic healthy benchmark.
- 10.8
How it was calculated
- Lifetime revenue: $75.00 × 4 orders/yr × 3 yrs = $900.00.
- Lifetime gross profit: $900.00 × 60% = $540.00.
- LTV:CAC: $540.00 ÷ $50.00 = 10.80:1.
How it works
Lifetime revenue = average order value × orders per year × customer lifespan in years.
Lifetime gross profit = lifetime revenue × gross margin — the earnings the relationship produces.
LTV:CAC = lifetime gross profit ÷ customer acquisition cost. The 3:1 benchmark means each acquisition dollar returns three dollars of lifetime profit.
Frequency and lifespan multiply: doubling repeat purchases doubles lifetime value without spending a cent more on acquisition.
Worked examples
$75 AOV, 4 orders/year, 3-year lifespan, 60% margin, $50 CAC
Lifetime revenue = 75 × 4 × 3 = $900. Lifetime gross profit = $540. LTV:CAC = 540 ÷ 50 = 10.8:1 — you could afford to spend considerably more acquiring customers.
$120 AOV, 2 orders/year, 5-year lifespan, 50% margin, $100 CAC
Lifetime revenue = $1,200. Lifetime gross profit = $600. LTV:CAC = 6:1. Healthy — acquisition is well covered by the long relationship.
How to measure
- Compute AOV and frequency from at least 12 months of order data to smooth seasonality.
- Estimate lifespan from cohort retention: if 40% of customers are still buying after 3 years, 3 years is defensible.
- Segment by acquisition channel — paid and organic customers often have very different lifespans.
- Use gross margin, not revenue, for the ratio that decides acquisition budgets.
- Recompute yearly; improving retention moves LTV more than most acquisition tweaks.
Assumptions & limitations
Planning estimate
- Purchase behavior is assumed constant over the lifespan — real cohorts usually decay.
- Future revenue is not discounted to present value; the result is nominal lifetime value.
- Averages hide distribution: a few whales can inflate the mean customer value.
- This is a planning estimate, not financial advice.
Frequently asked questions
Multiply average order value × purchases per year × average customer lifespan in years, then apply gross margin for lifetime profit. $75 × 4 orders × 3 years = $900 revenue; at 60% margin that is $540 of lifetime gross profit.
3:1 or higher is the classic benchmark — each acquisition dollar returns at least three dollars of lifetime gross profit. Below 3:1, growth is fragile; far above 5:1, you are probably under-spending on growth.
Use gross profit for decisions. Revenue-based LTV overstates what you can spend on acquisition because product costs still have to be paid. The ratio that matters is lifetime gross profit to CAC.
Three levers: raise AOV (bundles, thresholds), increase purchase frequency (replenishment reminders, subscriptions, loyalty), and extend lifespan (win-back campaigns, great post-purchase experience). Retention work usually has the highest ROI.
It varies enormously: consumables with subscriptions can exceed 3–5 years, while one-off gift purchases may be under a year. Derive it from your own cohort data — the percentage of customers still active after 12, 24 and 36 months — rather than industry averages.