Measurely

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

  1. Lifetime revenue: $75.00 × 4 orders/yr × 3 yrs = $900.00.
  2. Lifetime gross profit: $900.00 × 60% = $540.00.
  3. 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

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.