LTV calculator.

LTV is what a customer spends with you over time, in gross profit. Compare it with CAC to see how much you can afford to pay for growth.

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Use averages across all customers. If you're under a year old, estimate orders per year from your first cohort.

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The short answer

Customer lifetime value (LTV) equals average order value × orders per year × years as a customer × gross margin. A customer who spends $60 per order, 2.5 times a year for 2 years, at 55% margin, is worth $165 in gross profit. Divide LTV by CAC; 3:1 or better is the common target.

How do you calculate LTV?

LTV = average order value × orders per year × years as a customer × gross margin

In the calculator's example: $60 × 2.5 × 2 × 55% = $165 in gross profit per customer. Leave out the margin and you get revenue LTV, $300 here, which is useful for forecasting but overstates what you can spend.

Should LTV use revenue or gross profit?

Gross profit, when you compare it with CAC. A customer who spends $300 but leaves you $165 after product and shipping can't justify a $150 CAC, even though revenue LTV makes it look fine.

What is a good LTV:CAC ratio?

LTV:CAC = LTV ÷ CAC

LTV:CAC What it means
Under 1:1 Each customer loses money over their whole life
1:1 to 3:1 Profitable but thin; little room to scale spend
3:1 The common target: healthy profit with room to grow
Above 5:1 Often under-spending; you could grow faster

With a $50 CAC, the example customer is 3.3:1. The most you could pay at 3:1 is $55.

How do you raise LTV?

  • Post-purchase and win-back emails that bring customers back for a second and third order.
  • Bundles and higher-value offers that lift average order value.
  • Subscriptions for products people reorder on a cycle.
  • Better margins on the products repeat buyers choose.

Most of that is email and retention work. See email and Klaviyo marketing for startups.

How accurate is LTV for a new brand?

Not very, at first. With less than a year of data, lifespan and repeat rate are guesses. Use conservative numbers, like one year of lifespan, and replace them with real cohort data once your first customers are 6–12 months old. Pair it with the CAC calculator, or see all free marketing calculators.

Frequently asked questions

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How do you calculate customer lifetime value?
Customer lifetime value equals average order value × orders per year × years as a customer × gross margin. A customer spending $60 per order, 2.5 times a year for 2 years, at a 55% margin, has an LTV of $165 in gross profit.
What is a good LTV to CAC ratio?
3:1 is the common target: lifetime gross profit three times the cost of winning the customer. Below 1:1 loses money. Well above 5:1 often means a brand is under-spending and could grow faster.
Should LTV be calculated on revenue or profit?
LTV should use gross profit when it's compared with CAC, because revenue ignores product and shipping costs. Revenue LTV is useful for forecasting sales but overstates how much a brand can afford to pay for a customer.
How can a startup estimate LTV without much data?
A startup can estimate LTV with conservative inputs, such as a one-year customer lifespan and its first cohort's repeat rate, then replace the estimates with real cohort data once customers are 6–12 months old.

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