$60 AOV, 60% margin, 4 purchases/year, 3 years, $50 CAC
- LTV = $432
- LTV:CAC ≈ 8.6
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Customer LTV Calculator
Estimate lifetime value, gross profit, and LTV:CAC using order value, margin, and retention.
Results
- Annual revenue
- $240 USD
- Lifetime revenue
- $720 USD
- Lifetime gross profit
- $432 USD
- LTV (gross profit)
- $432 USD
- LTV : CAC
- 8.64
How to use this calculator
- Enter average order value, gross (or contribution) margin, purchase frequency, and expected retention years.
- Enter customer acquisition cost to see the LTV:CAC ratio.
- Review lifetime revenue, gross profit, LTV, and the ratio in one view.
Inputs explained
- Average order value
- Revenue per order on average.
- Gross margin %
- Gross or contribution margin as a percent of revenue (include variable fulfillment if desired).
- Purchases per year
- Expected repeat purchase frequency per customer each year.
- Retention (years)
- How long the average customer stays active (years of repeat purchases).
- CAC
- Acquisition cost per customer including paid marketing, sales, or commissions.
How it works
Lifetime revenue = AOV × purchases/year × retention years.
Lifetime gross profit = lifetime revenue × gross margin.
LTV:CAC compares gross profit to acquisition cost.
Formula
LTV = AOV × Frequency × Years × Margin LTV:CAC = LTV ÷ CAC
When to use it
- Assessing DTC or ecommerce unit economics before scaling ad spend.
- Comparing cohort performance by adjusting retention or frequency.
- Checking if LTV:CAC meets fundraising or board targets.
Tips & cautions
- Use contribution margin if you want to subtract variable fulfillment/shipping costs from revenue.
- Convert churn to retention by inverting (e.g., 20% annual churn ≈ 5 years retention).
- Align frequency to retention units—if you know monthly orders, convert to annual for consistency.
- Simple static model—does not discount cash flows or model declining frequency over time.
- Assumes averages; real cohorts vary by acquisition channel and seasonality.
- Retention in years is coarse; monthly churn curves require a more detailed model.
Worked examples
$40 AOV, 50% margin, 6 purchases/year, 2 years, $30 CAC
- LTV = $240
- LTV:CAC = 8
Deep dive
This customer LTV calculator multiplies average order value, purchase frequency, retention, and margin to show lifetime revenue, gross profit, and LTV:CAC. Enter CAC to see if your unit economics clear common benchmarks.
Use it for ecommerce, SaaS-like retail, or subscription add-ons to sanity-check marketing spend. Swap in contribution margin if you want to include variable fulfillment or shipping costs.
FAQs
- Does this include churn or discounting?
- Retention years approximate churn. Add discounts by reducing AOV or margin.
- Should I use gross or contribution margin?
- Use contribution margin if you want to include variable marketing/fulfillment costs.
- Is LTV:CAC of 3:1 still a good target?
- 3:1 is a common rule of thumb, but some businesses need higher ratios to cover overhead or cash flow timing. Compare against your company benchmarks.
- How do I convert churn to retention years?
- Divide 1 by the annual churn rate (e.g., 15% annual churn ≈ 6.7 years). For monthly churn, convert to annual before using this tool.
- Does this include payback period?
- No. It shows total LTV and LTV:CAC. Use a separate payback model to see how many months to recover CAC.
Related calculators
Unit economics vary by business model. Validate with your finance team.