Calculate customer lifetime value and the LTV:CAC ratio.
Calculated instantly in your browser.
How is customer lifetime value calculated?
LTV = average purchase value × purchases per year × lifespan × gross margin, and LTV:CAC = lifetime value ÷ customer acquisition cost. Lifetime value sets a ceiling on acquisition spend. For example, $50 spent four times a year for three years at 60% margin is an LTV of $360; against a $100 CAC that is a 3.6:1 ratio, where 3:1 or more signals a healthy model.
Understanding your result
Lifetime value tells you the long-run worth of a customer, which sets a ceiling on acquisition spend. A LTV:CAC ratio of 3:1 or more is a common sign of a healthy, scalable model.
Formula and method
LTV = average purchase value × purchases per year × lifespan × gross margin. LTV:CAC = lifetime value ÷ customer acquisition cost.
Assumptions and limitations
LTV here is an average built from the inputs you provide, so it is only as reliable as your margin, lifespan and purchase-frequency estimates. It assumes those hold steady and ignores discounting of future cash, churn variation and cohort differences. Use it to guide acquisition budgets, not as a precise per-customer figure.
Worked example
$50 spent four times a year for three years at 60% margin is an LTV of $360; against a $100 CAC that is a 3.6:1 ratio.
How to use this tool
- Enter average purchase value and frequency.
- Add the average customer lifespan.
- Optionally add margin and CAC for profit and the ratio.
Common mistakes to avoid
- Using revenue instead of margin and overstating value.
- Overestimating customer lifespan.
About the Customer Lifetime Value Calculator
The Customer Lifetime Value Calculator estimates how much profit a customer brings over their relationship with your business, and compares it to acquisition cost with the LTV:CAC ratio.
Who should use this tool
Marketers, founders and ecommerce operators measuring unit economics.
Benefits
- Revenue or margin-based lifetime value.
- Annual value per customer.
- LTV:CAC ratio with a health check.
- Simple inputs, instant result.
Practical use cases
- Deciding how much you can spend to acquire a customer.
- Measuring the payoff of retention efforts.
- Reporting unit economics to investors.
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Frequently asked questions
Should I use revenue or margin?
Margin gives a profit-based LTV, which is the more useful number for deciding acquisition spend. Leave margin blank to see revenue-based LTV.
What is a good LTV:CAC ratio?
Around 3:1 is a common benchmark. Much lower can mean you are overspending to acquire; much higher can mean you are underinvesting in growth.
Should future customer value be discounted?
For a more rigorous figure, yes. This tool sums value across the lifespan without discounting cash received in later years to present value. That keeps it simple and comparable, but it can overstate long lifespans. For finance-grade analysis, apply a discount rate to future years yourself.