LTV Calculator

What Is the LTV Calculator?

Customer Lifetime Value (LTV) estimates the total revenue a business can expect from a single customer over the entire relationship -- a foundational metric for judging how much you can afford to spend acquiring customers.

How to Use This Tool

Enter average purchase value, purchase frequency per year, and average customer lifespan in years. LTV appears instantly.

The Formula

A Worked Example

Suppose a small online coffee subscription shop has hypothetical numbers. The average purchase is 50, customers buy 4 times per year, and a typical customer stays for 3 years. Multiplying 50 by 4 gives 200 of revenue per customer per year, and 200 over 3 years gives a lifetime value of 600. Those are also the default values loaded into the calculator, so you can see the result immediately and then replace each field with your own figures.

Keep the Units Consistent

The most common mistake is mixing time units. The tool expects purchase frequency per year and lifespan in years. If your customers order monthly, the frequency is 12, not 1. If your average customer stays six months, the lifespan is 0.5. Entering months in the lifespan field would inflate the result twelve-fold, and the calculator has no way to know you meant something else. Decimals are accepted, so fractional years are fine.

Where the Inputs Come From

• Average purchase value: total revenue divided by number of orders over a period. If you sell at very different price points, consider running the calculation per customer segment instead of blending everyone together.
• Purchase frequency: total orders divided by unique customers over the same period, annualized.
• Customer lifespan: often estimated as 1 divided by your annual churn rate. A 25 percent annual churn implies about 4 years. This is an approximation that assumes churn is steady, which is rarely perfectly true.

What This Number Does Not Tell You

This is a revenue-based LTV. It does not subtract the cost of goods, shipping, payment fees, support, or discounts, so it can look far healthier than the actual profit a customer generates. A product with a 20 percent gross margin and one with an 80 percent margin can share the same revenue LTV and have very different economics. If you plan to compare LTV against acquisition cost, consider multiplying the result by your gross margin percentage first, or at least be aware that the comparison is flattering.

It also does not discount future revenue. Money received in year three is worth less than money received today, and a business with high uncertainty may want to be more conservative than a straight multiplication. The result is a single average; it hides the reality that a small share of loyal customers often accounts for a large share of the revenue.

Using the Result for Decisions

Once you have an LTV figure, the natural next step is to compare it to what you pay to win a customer. The LTV:CAC Ratio Calculator on this site does that comparison. You can also use LTV to test scenarios: what happens to lifetime value if you raise average purchase value by 10 percent, versus extending lifespan by half a year through better onboarding? Because the formula is a simple product, a 10 percent lift in any one input lifts LTV by 10 percent, so the useful question is which input is cheapest for your business to improve.

Be careful with new businesses. If you have only been operating for eight months, you cannot observe a three-year lifespan. Any lifespan you enter is a projection, and the resulting LTV is only as reliable as that guess. Revisit the number as real cohort data accumulates, and treat early figures as a planning range rather than a fact.

Frequently Asked Questions