Customer lifetime value helps businesses decide how much they can responsibly spend to acquire a customer. This calculator estimates LTV from average order value, purchase frequency, customer lifespan, and gross margin.
What this calculator does
Estimate customer lifetime value and gross profit value using purchase value, frequency, customer lifespan, and margin.
How to use it
Enter average order value, purchase frequency, customer lifespan, gross margin, and acquisition cost. The calculator estimates revenue LTV, gross profit LTV, LTV:CAC ratio, and payback signal.
Formula and assumptions
- Revenue LTV = average order value × purchase frequency × customer lifespan.
- Gross profit LTV = revenue LTV × gross margin.
- LTV:CAC = gross profit LTV ÷ customer acquisition cost.
Assumptions
- LTV models are only as accurate as the retention and purchase frequency assumptions.
- For service businesses, use average contract value or recurring revenue where applicable.
- Gross profit LTV is more useful than revenue LTV for marketing investment decisions.
How to interpret your result
A higher LTV gives marketing more room to work. If LTV:CAC is low, improve retention, pricing, margin, close rate, or lead quality before scaling spend aggressively.
Next steps
Plan growth around customer value
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