Calculate customer lifetime value (LTV)
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LTV Formula: LTV = Average order value × Purchase frequency × Customer lifespan. LTV with margin = LTV x Margin / 100.
LTV:CAC ratio: LTV/CAC >= 3 — business model is sustainable and scalable. LTV/CAC from 1 to 3 — there's room for growth. LTV/CAC < 1 — customer acquisition doesn't pay off.
What affects LTV: increasing average order value (upsell, cross-sell), increasing purchase frequency (loyalty programs, email marketing), extending customer lifespan (improving service, retention).
LTV Calculator: Compute Customer Lifetime Value Online
This free LTV calculator estimates Customer Lifetime Value using multiple formulas. Understand how much revenue each customer generates over time and set smarter acquisition budgets.
What is Customer Lifetime Value (LTV)
LTV (Customer Lifetime Value, also CLV) is the total revenue or profit a company expects to earn from a single customer over the entire relationship. It represents the true long-term value of a customer, not just their first purchase.
LTV is a foundational metric for marketing spend decisions: it determines how much you can afford to spend acquiring a new customer (CAC) and helps compare the value of different customer segments.
LTV formulas
Basic formula
LTV = Average Order Value × Purchase Frequency (per year) × Customer Lifespan (years)Example: AOV = $50, purchases 4 times/year, customer stays 3 years. LTV = $50 × 4 × 3 = $600.
Margin-adjusted formula
Profit LTV = AOV × Gross Margin × Purchase Frequency × Customer LifespanCohort analysis formula
LTV = ARPU × Average Customer Lifetime| Method | Accuracy | Data needed | Complexity |
|---|---|---|---|
| Basic formula | Medium | AOV, frequency, lifespan | Low |
| Cohort analysis | High | Purchase history by cohort | High |
| Predictive LTV (ML) | Very high | Large datasets, models | Very high |
LTV to CAC ratio
| LTV/CAC ratio | Interpretation |
|---|---|
| < 1 | Critical: losing money on every customer |
| 1–3 | Business barely survives; no buffer for operating costs |
| 3–5 | Healthy ratio for most businesses |
| > 5 | Excellent; consider investing more in acquisition |
CAC Payback Period — months to recover acquisition cost from a customer. SaaS benchmark: 12–18 months.
How to increase LTV
- Increase purchase frequency — loyalty programs, email triggers, personalized recommendations
- Increase average order value — upsell, cross-sell, bundles, premium tiers
- Reduce churn — better onboarding, Customer Success, early churn signal detection
- Expand product lines — give customers more reasons to buy from you
- Improve NPS — satisfied customers stay longer and refer others
FAQ
What's the difference between LTV and CLV?
They're synonyms. CLV (Customer Lifetime Value) = LTV. Sometimes pLTV (predicted LTV) refers to ML-based forward-looking estimates.
How do I calculate LTV for a new business with no history?
Use industry benchmarks and competitor research for initial assumptions. Run early cohort analysis after 3–6 months and extrapolate trends. Refine as you accumulate more data.
Should I discount LTV for time value of money?
For rigorous financial planning, yes. Discounted LTV accounts for the fact that future cash flows are worth less than present ones: dLTV = Σ (Period profit / (1 + r)^t) where r is your discount rate.
See also: unit economics, ROI calculator, A/B test calculator.
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