Customer Lifetime Value Calculator

Customer Lifetime Value (LTV/CLV) = total profit from a customer over their lifespan with you. Foundation metric for pricing CAC, retention investment, and business valuation.

80 average purchase × 4 purchases/year × 5 years × 70% gross margin = 1,120 LTV. Against 200 CAC that's 5.6x ratio - strong. Use to justify acquisition spend.

Higher LTV justifies higher CAC and more retention investment. Even 20% LTV improvement (longer retention or bigger purchases) transforms unit economics.

Run it with sensible defaults

Using average purchase value of 80, annual purchase frequency of 4, customer lifespan of 5, gross margin of 70%, the calculation works out to 1,120.00. The defaults are meant as a starting point, not a recommendation.

The levers in this calculation

The inputs — Average Purchase Value, Annual Purchase Frequency, Customer Lifespan, and Gross Margin % — do not pull with equal force.

How the math works

Annual revenue = value × frequency. Lifetime revenue = annual × lifespan. LTV = lifetime × margin.

What the score tells you

Headline financial numbers — income, savings, debt — each tell part of the story. This calculation stitches several together into a single read you can track over time. The value is in the direction, not the absolute number.

What this doesn't capture

The score is a composite of the inputs you provide. Life context — job security, family obligations, health, housing — doesn't appear in the math but shapes the real picture. Use the number as a prompt, not a verdict.

Worked example

A subscription software business charges 50 per month (600 annually). Customers renew 1 time per year. Average customer stays for 3 years. Gross margin across delivery, support, and hosting is 75%.

• Annual purchase value: 600
• Annual frequency: 1
• Customer lifespan: 3 years
• Gross margin: 75%

The calculation: 600 × 1 × 3 × 0.75 = 1,350 lifetime value per customer.

If acquisition cost is 300 per customer, the ratio is 4.5:1 — each pound spent on acquisition returns 4.5 pounds in gross profit over the customer's relationship.

When this metric matters most

LTV appears in several business decisions:

• Acquisition budgets: determines how much you can afford to spend per new customer
• Retention initiatives: shows whether a loyalty program or support upgrade pays for itself
• Pricing changes: models the financial impact of raising or lowering purchase value
• Product roadmap: illustrates the value of features that extend customer lifespan
• Business valuation: professional buyers often apply LTV multiples when assessing recurring-revenue companies

What the result shows and does not show

This calculation estimates profit contribution based on four inputs: average transaction size, purchase cadence, duration, and margin. It operates in isolation — it does not model:

• Variation in customer behavior or segmentation across different cohorts
• Seasonality, churn acceleration, or non-linear retention curves
• Marketing or operational costs beyond gross margin
• Time value of money (discounting future cash flows)
• Product changes, market shifts, or competitive pressure

The output is an arithmetic result given your inputs, not a forecast. It illustrates the potential profit contribution of a customer profile under steady conditions.

For educational use

This calculator models a financial relationship for illustration. Real LTV varies by customer segment, geography, and time period. Use the output to identify which levers matter most and to test scenarios — not to replace detailed historical analysis or cash-flow modeling.