Free Tool
Lifetime Value Calculator
A customer is not worth one order. They are worth every order they will ever place — and the difference between one order and a lifetime is the whole argument for spending money to acquire them.
Planning estimate, not financial advice. LTV is a planning estimate from assumptions you enter — purchase frequency and lifespan are guesses about the future, and the ratio is a comparison, not a verdict. All figures on this page are estimates or scenarios for planning purposes only. They are not financial, tax or legal advice, and no earnings are promised. Read the full financial disclaimer.
What this tool does
Enter the average order value, how often a customer buys in a year, how many years a typical customer stays, and your gross margin percentage. The calculator shows lifetime value as revenue (everything the customer ever spends) and as margin (the profit in that revenue after product and delivery costs), and — if you enter your CAC — the LTV-to-CAC ratio.
The ratio is the decision, not either number alone. A customer worth $200 in lifetime margin against a $40 acquisition cost is a ratio of 5 — growth pays for itself. The same customer at a $250 acquisition cost is a ratio of 0.8 — every new customer loses money, however fast the store grows. The page states the caveat plainly: a ratio above the cost of acquiring is the direction that works, but the ratio is not a verdict, because it rests on guessed frequency and lifespan.
Both methods are shown because they answer different questions. Revenue LTV is what the customer spends with you; margin LTV is what you keep. Comparing revenue LTV with CAC overstates the case by the whole cost of goods — always use the margin view for the ratio.
Try it
Waiting. Enter average order value, purchase frequency and lifespan, and press Calculate LTV. Lifespan and frequency are your best estimates — say so when you quote the result.
How it works
Revenue LTV: average order value multiplied by purchases per year multiplied by lifespan in years. Margin LTV: revenue LTV multiplied by the gross margin as a decimal. LTV-to-CAC ratio: margin LTV divided by CAC. All three are simple multiplications — the difficulty is not the maths, it is the inputs: frequency and lifespan are estimates about future behaviour, and small changes in either move the answer a lot.
The formula assumes a steady customer: same order value, same frequency, same lifespan for the average customer. Real customers vary wildly — a few loyal customers and many one-time buyers average out to the same numbers as a uniform middle, and the calculator cannot tell the difference. That is why the page shows both the revenue and the margin view, and why it warns against treating the ratio as a verdict.
Assumptions and limitations
LTV is the most assumption-heavy calculator on this site. Purchase frequency and lifespan are guesses, and the answer is only as honest as they are — a lifespan of 5 years instead of 2.5 doubles the result without any change in the business. The calculator does not model churn properly (customers leave at different rates), discounting (a dollar in three years is worth less than a dollar today), or the cost of keeping a customer (retention marketing is not free).
- Retention and lifespan are user-entered estimates. No retention benchmark is quoted as fact anywhere on this page — your own order history is the only honest source.
- Use margin LTV, not revenue LTV, for the ratio with CAC. Comparing revenue with acquisition cost overstates the case by the whole cost of goods.
- Lifespan must be more than zero; a lifespan of zero means no lifetime value at all, which the calculator rejects as an input error.
- The LTV:CAC ratio is a comparison, not a verdict. A ratio above 1 means lifetime margin covers acquisition cost on these assumptions — it does not promise the future will match them.
Worked example
Example (illustrative inputs, not a real store's figures). A store's average order is $45, customers buy 3 times a year, a typical customer stays 2.5 years, gross margin is 60%, and CAC is $40. Revenue LTV: $45 × 3 × 2.5 = $337.50. Margin LTV: $337.50 × 60% = $202.50. LTV:CAC ratio (margin view): $202.50 ÷ $40 = 5.1. On these assumptions, each customer returns about five times the cost of acquiring them in lifetime margin. But if the true lifespan is 1 year instead of 2.5, margin LTV falls to $81.00 and the ratio to 2.0 — same store, very different answer, which is why lifespan is the input to check first.
Frequently asked questions
What is the difference between revenue LTV and margin LTV?
Revenue LTV is everything the customer ever spends with you. Margin LTV is what you keep after product and delivery costs. For decisions — especially comparing with CAC — always use margin LTV: comparing revenue with acquisition cost overstates the case by the whole cost of goods, and a store can look profitable while losing money on every customer.
What is a good LTV:CAC ratio?
The honest answer is 'above the cost of acquiring, with room for the future'. A ratio above 1 means lifetime margin covers acquisition cost on your assumptions. Beyond that, the ratio is sensitive to your lifespan and margin guesses, so this page does not quote a benchmark as fact. What matters is the direction and the cushion — and re-running the numbers when your assumptions change.
Where do I get purchase frequency and lifespan?
From your own order history: total orders divided by total customers gives orders per customer, and the time between a customer's first and last order gives a lifespan estimate. If you have no history yet, they are guesses — label them as guesses, use a cautious lifespan, and update the calculation as real data arrives.
Why does lifespan change the answer so much?
Because LTV multiplies by lifespan directly. Double the lifespan and you double the LTV, with no change in the business. That is why lifespan is the input to check first, and why a cautious lifespan is better than an optimistic one: the cost of being wrong is spending acquisition money that the customer never repays.
Does LTV include the cost of keeping the customer?
No — not in this calculator. Retention marketing, support and loyalty costs sit outside the formula, so margin LTV is slightly optimistic wherever those costs are real. If retention costs are large in your business, subtract them from the margin before comparing with CAC.
How does LTV connect to CAC?
They are a pair: CAC is what a customer costs to win, LTV is what they are worth once won. Spend more than the margin LTV to acquire a customer and growth loses money; spend far less and you are probably under-investing in growth. Run the CAC calculator for the cost side, this page for the value side, and compare the two.