Customer LTV calculator
Enter your average order value, purchases per year, gross margin, expected years as a customer, and optionally your CAC. You get lifetime value, your LTV to CAC ratio, and CAC payback in months.
- LTV (gross profit)
- 480.00
LTV = order value × purchases/yr × margin × years. Using margin, not revenue, keeps it honest for acquisition decisions.
Add CAC to see your LTV:CAC ratio and payback period.
How it works
LTV here is average order value times purchases per year times gross margin times expected years as a customer. Multiplying by margin matters: a customer who spends 1,000 over their lifetime at a 40% margin is worth 400 in gross profit, not 1,000. Revenue-based LTV flatters every acquisition decision that follows from it.
The LTV to CAC ratio is LTV divided by CAC. It compares what a customer is worth in gross profit against what you paid to acquire them. A ratio of 1.0 means acquisition exactly consumes the customer lifetime gross profit, leaving nothing for overhead or growth, so viable businesses need meaningfully more than that.
CAC payback is CAC divided by monthly gross profit per customer, where monthly gross profit is order value times purchases per year times margin, divided by 12. It answers how many months until an acquired customer has repaid their acquisition cost. Payback is a cash-flow lens: a great LTV to CAC ratio with a very long payback can still starve a business of cash.
Assumptions and limitations
- Expected years as a customer is the softest input. Young businesses have to guess it, and an optimistic guess inflates LTV linearly.
- This is a simple average model. It ignores discounting of future profit, churn curves, and the fact that a few heavy customers often dominate the average.
- It assumes purchase behavior stays constant over the lifetime; in reality frequency and order value usually change as customers mature.
- Blended LTV hides segment differences. Customers from different channels or cohorts can have wildly different lifetime values.
Frequently asked questions
How do you calculate customer lifetime value?
Multiply average order value by purchases per year, by gross margin, by the number of years a customer typically stays. A 100 order value, 4 purchases a year, 50% margin, and 3-year lifetime gives an LTV of 600 in gross profit. Using margin instead of raw revenue keeps the number honest for acquisition decisions.
What is a good LTV to CAC ratio?
It depends on your cost structure and how fast you need capital back, so treat any single universal target with suspicion. The floor logic is what matters: at 1.0 the customer lifetime gross profit only repays acquisition, so everything above 1.0 is what funds overhead, product, and growth. Businesses with long payback periods or high fixed costs need a higher ratio than lean ones with fast payback.
What is CAC payback period?
CAC payback is how long it takes an acquired customer to generate enough gross profit to cover their acquisition cost, calculated as CAC divided by monthly gross profit per customer. A 300 CAC repaid at 25 of gross profit per month is a 12-month payback. Shorter payback means you can recycle cash into acquisition faster.
Should LTV be based on revenue or profit?
Gross profit. Comparing revenue LTV to CAC overstates how much you can afford to spend, because acquisition is paid in cash while revenue still carries the cost of goods and delivery. This calculator multiplies by gross margin for exactly that reason.
Does this calculator store my business numbers?
No. It runs entirely client-side in your browser, and nothing you enter is transmitted or saved. Your margin and CAC figures never leave your device.
More free tools like this, by email
I publish new calculators and explainers regularly. Get them when they land — no spam, unsubscribe anytime.