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Customer Lifetime Value Calculator

Calculate customer lifetime revenue, gross profit, and your strategic LTV:CAC sustainability ratio.

Overview & Mechanics

How the Customer Lifetime Value Calculator Works

The Customer Lifetime Value (LTV / CLV) Calculator determines the projected net gross profit generated by a single customer across their entire relationship with your business. Comparing LTV to CAC benchmarks whether your growth strategy is financially sound.

Step-by-Step Tutorial

How to Use This Tool in Simple Steps

01

Enter Average Order Value (AOV) per transaction.

02

Enter Purchase Frequency (number of orders per customer each year).

03

Enter Average Customer Lifespan in years.

04

Enter your product or service Gross Profit Margin percentage.

05

Optionally enter Customer Acquisition Cost (CAC) to compute your LTV:CAC ratio and receive automated health feedback.

Mathematical Logic

Formulas & Computational Methodology

Annual Customer Value = Average Order Value × Purchase Frequency. Lifetime Revenue = Annual Customer Value × Average Customer Lifespan. Lifetime Gross Profit (LTV) = Lifetime Revenue × (Gross Margin % / 100). LTV:CAC Ratio = LTV / CAC.
Case Study Scenario

Real-World Walkthrough

An e-commerce coffee subscription with an average order value of $35, ordered 10 times per year over a 3-year lifespan with a 65% gross margin yields $1,050 in lifetime revenue and $682.50 in gross profit LTV. If CAC is $150, their LTV:CAC ratio is 4.55:1—a strong, highly scalable benchmark.
Important Caveats

Limitations & Assumptions

  • Assumes static churn rates across cohorts without non-linear expansion revenue.
  • Gross margin must exclude fixed corporate overhead to isolate unit economic value.
Common Questions

Frequently Asked Questions

A 3:1 ratio is widely regarded as the golden standard for healthy commercial businesses. A ratio below 1:1 loses money on every acquisition. A ratio above 5:1 often indicates underinvestment in marketing.

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