Should LTV use revenue or profit?

Use gross profit. Revenue-based LTV overstates value by the whole cost of delivery.

How do I estimate customer lifespan?

Lifespan ≈ 1 ÷ annual churn rate. If 25% of customers leave each year, average lifespan is about four years.

What LTV:CAC ratio should I target?

Roughly 3:1. Below 1:1 growth destroys cash; far above 5:1 usually means underspending on marketing.

Does this work for one-time purchases?

Yes — set purchases per year to 1 and lifespan to 1 for a single-transaction business.

Customer Lifetime Value (LTV) Calculator

Estimate the total profit one customer brings.

Customer lifetime value is the total gross profit you expect from an average customer across the whole relationship. It reframes marketing from a cost into an investment: if a customer is worth $1,400 in profit over three years, spending $350 to win one is obviously sensible.

This calculator uses average order value, how often a customer buys per year, your gross margin, and how many years the average relationship lasts. Margin matters because revenue you never keep is not value — a $200 order at 25% margin contributes $50, not $200.

Enter your CAC as well and the calculator reports the LTV:CAC ratio, the standard benchmark for whether growth is sustainable. Below 1:1 you lose money on every customer. Around 3:1 is considered healthy. Far above 5:1 usually means you are underinvesting in growth and leaving demand on the table. Everything recalculates as you type.

Your numbers

Average order value

Purchases per year

Gross margin

Average customer lifespan (years)

Customer acquisition cost (optional)

Customer lifetime value

$972.00

🇺🇸 US · USD

Annual revenue per customer: $720.00
Annual gross profit per customer: $324.00
LTV : CAC ratio: 3.24 : 1
Net value after acquisition: $672.00

Estimates only. Results from this calculator are for general informational purposes and are not tax, legal, accounting or financial advice. Rates change and individual circumstances vary — confirm figures with the CRA, the IRS, your state or provincial authority, or a licensed professional before acting on them.

How it's calculated

Annual revenue per customer = Average order value × Purchases per year
LTV = Annual revenue × Gross margin % × Average lifespan (years)
LTV : CAC = LTV ÷ Customer acquisition cost

Understand the numbers

CAC and LTV: the two numbers that tell you if growth is working

Frequently asked questions

Should LTV use revenue or profit?: Use gross profit. Revenue-based LTV overstates value by the whole cost of delivery.
How do I estimate customer lifespan?: Lifespan ≈ 1 ÷ annual churn rate. If 25% of customers leave each year, average lifespan is about four years.
What LTV:CAC ratio should I target?: Roughly 3:1. Below 1:1 growth destroys cash; far above 5:1 usually means underspending on marketing.
Does this work for one-time purchases?: Yes — set purchases per year to 1 and lifespan to 1 for a single-transaction business.

Related calculators

Customer Acquisition Cost (CAC) CalculatorFind what one new customer really costs to win.Profit Margin CalculatorTurn revenue and cost into gross margin percentage.Net Profit CalculatorRevenue minus every cost — the real bottom line.Break-Even CalculatorFind the sales volume where you stop losing money.