LTV Calculator

An LTV calculator computes customer lifetime value-the total revenue one customer generates over their entire relationship with your business. It multiplies average order value by purchase frequency by customer lifespan in years. If customers spend $99/month, buy 12 times per year, and stay for 2.5 years, LTV is $2,970. The calculator shows whether your unit economics work by comparing LTV to customer acquisition cost (CAC). The ideal ratio is 3:1 or higher-LTV should be at least three times what you spend to acquire the customer. Use the arr-calculator alongside this tool to see how customer value scales into annual recurring revenue, and the churn-rate-calculator to compute accurate customer lifespan from your churn rate.

Multiply average order value by purchase frequency per year by customer lifespan in years. The formula is LTV = AOV × Frequency × Lifespan. If average order value is $120, customers buy 3 times per year, and stay for 4 years, LTV is $120 × 3 × 4 = $1,440. For subscriptions, frequency is usually 12 (monthly billing) or 1 (annual billing). Customer lifespan is the inverse of churn rate. If monthly churn is 5%, average lifespan is 20 months (1.67 years). If annual churn is 30%, lifespan is 3.33 years. This calculator handles the math instantly and adds LTV:CAC ratio if you provide acquisition cost. After calculating LTV, use the mrr-calculator to track monthly recurring revenue trends and confirm whether retention improvements increase LTV over time.

A healthy LTV:CAC ratio is 3:1 or higher. LTV should be at least three times what you spend acquiring the customer. A 5:1 ratio is strong-you make $5 for every $1 spent on acquisition. A 10:1 ratio is exceptional and means you have pricing power or very low acquisition costs. Ratios below 3:1 signal problems. At 2:1, you're profitable but fragile-small CAC increases or churn spikes break the model. Below 1:1, you lose money on every customer and can't scale without fixing unit economics first. SaaS Capital's 2024 analysis of 500 companies found median LTV:CAC of 3.2:1, with top quartile above 5:1. If your ratio is below 3:1, either increase LTV (raise prices, reduce churn, upsell) or decrease CAC (improve conversion, shift to organic channels) before scaling spend. Track CAC changes with the google-ads-budget-calculator and conversion improvements with the conversion-rate-calculator-marketing.

Customer lifespan is the inverse of churn rate. Divide 1 by your monthly or annual churn percentage. If monthly churn is 5%, lifespan is 1 ÷ 0.05 = 20 months (1.67 years). If annual churn is 20%, lifespan is 1 ÷ 0.20 = 5 years. For subscription businesses, use monthly churn divided into 1 to get months, then divide by 12 for years. If you don't track churn formally, estimate it by looking at how many customers from a cohort are still active 12 months later. If you started with 100 customers in January and 70 are still active in December, annual churn is 30% and average lifespan is 3.33 years. This calculator accepts lifespan in years directly, but you can use the churn-rate-calculator to compute lifespan from churn data accurately. After calculating lifespan, track retention improvements to increase LTV without changing pricing or frequency.

LTV (lifetime value) and CLV (customer lifetime value) are the same metric with different abbreviations. Both measure total revenue generated by one customer over their entire relationship with your business. Some companies and analysts prefer "CLV" because it's more explicit, while others use "LTV" because it's shorter. The formula and meaning are identical: average order value × purchase frequency × customer lifespan. In practice, SaaS companies tend to say LTV, while e-commerce and B2B companies often say CLV. This calculator uses LTV in the name but computes the same thing as any CLV calculator. What matters is tracking the metric consistently over time and comparing it to acquisition cost (CAC) to evaluate unit economics. Use the arr-calculator to see how LTV scales into annual recurring revenue, and the mrr-calculator for monthly tracking.

Increase LTV by raising prices, reducing churn, increasing purchase frequency, or expanding revenue per customer through upsells and cross-sells. Raising prices 10-20% often has minimal churn impact but directly increases LTV. Reducing churn from 5% to 3% monthly doubles customer lifespan from 20 months to 33 months. Increasing purchase frequency from 2 to 3 times per year lifts LTV by 50%. Upselling 30% of customers to a higher tier can increase blended LTV by 20-40% with zero acquisition cost. Test one lever at a time and measure impact. Use the churn-rate-calculator to track retention improvements, and the conversion-rate-calculator-marketing to measure upsell conversion rates. After making changes, recalculate LTV monthly to see whether improvements hold or degrade over time.

Payback period is how long it takes to recover customer acquisition cost from revenue. Calculate it by dividing CAC by monthly revenue per customer. If CAC is $400 and monthly revenue per customer is $100, payback is 4 months. Payback matters for cash flow. If payback is 12 months and you acquire 100 customers per month at $400 CAC, you need $480K in the bank to cover 12 months of acquisition spend before revenue catches up. SaaS companies should target payback under 12 months. E-commerce can tolerate 3-6 months because purchase frequency is higher. If payback exceeds 18 months, growth is cash-constrained even if LTV:CAC looks healthy. Improve payback by increasing prices (lifts monthly revenue) or lowering CAC. Use the google-ads-budget-calculator to model how CAC changes affect payback period and total cash needs.

Use net revenue after cost of goods sold (COGS) for LTV calculations that inform acquisition budgets. Gross LTV (revenue before COGS) inflates profitability and leads to overspending on acquisition. If average order value is $120 but COGS is $50, your net revenue per order is $70. Use $70 for LTV calculation. If you spend $200 CAC and think you're making $120 per order (gross), your LTV:CAC looks like 3.6:1 at 2-year lifespan ($120 × 12 × 2 = $2,880 LTV). But net LTV is $70 × 12 × 2 = $1,680, giving you a 8.4:1 ratio-still healthy but much tighter. For internal planning and investor reporting, use net LTV. For pricing strategy and revenue forecasting, track gross LTV separately. After calculating net LTV, use the mrr-calculator to track net new MRR growth and confirm revenue trends match LTV projections.

Recalculate LTV quarterly if churn, pricing, or retention tactics change. Track LTV by cohort (customers acquired in the same month) to see whether it's improving or degrading over time. If January 2024 cohort has $2,000 LTV and July 2024 cohort has $1,200 LTV six months later, your retention is weakening-fix it before scaling acquisition. For stable businesses with low churn (<3% monthly), annual recalculation is fine. For high-growth or high-churn businesses, calculate monthly. Always recalculate after major changes: price increases, churn reduction initiatives, new upsell offers, or shifts in acquisition channels. Different channels often have different LTV-organic might be $2,500, paid ads might be $800. If you scale paid ads without tracking channel-specific LTV, you'll overspend. Use the churn-rate-calculator to monitor churn monthly and feed updated lifespan into LTV calculations.

Yes. E-commerce LTV calculation is identical: average order value × purchase frequency × customer lifespan. The difference is purchase behavior. Subscription e-commerce (meal kits, beauty boxes) looks like SaaS-monthly revenue, predictable frequency. One-time purchase e-commerce (furniture, electronics) has lumpy frequency and longer gaps between orders. For one-time purchases, track repeat purchase rate and average months between orders. If 40% of customers return within 18 months and average order value is $200, LTV is $200 × 1.4 (initial + 40% repeat) = $280. For subscription e-commerce, use monthly churn to calculate lifespan like SaaS. Track LTV separately for first-time buyers versus repeat buyers-repeat buyers typically have 2-3x higher LTV. Use the conversion-rate-calculator-marketing to track repeat purchase conversion and the free-engagement-rate-calculator for email and social engagement that drives repeat orders.

There is no universal benchmark-"good" depends entirely on your acquisition cost and business model. The practical answer: LTV is good when it is at least 3x your customer acquisition cost. A SaaS company with $50/month pricing and 5% monthly churn has LTV of roughly $1,000 ($50 x 20-month lifespan). If CAC is $300, that is a 3.3:1 ratio-solid. If CAC is $800, that is 1.25:1-broken. For context, Shopify merchants typically target $200-$500 LTV per customer. Mid-market SaaS companies average $2,000-$10,000 LTV. Enterprise SaaS can reach $50,000+ LTV per customer with multi-year contracts and expansion revenue. Rather than chasing an absolute number, track LTV trends over time. If your January 2024 cohort has 20% higher LTV than your January 2023 cohort at the same point in their lifecycle, your retention and monetization are improving. Use the ltv-calculator to model how changes in average order value, frequency, or churn shift your LTV, and see whether each cohort's LTV covers your current CAC.

A 3:1 LTV:CAC ratio is considered the minimum healthy threshold because it accounts for gross margin, overhead, and growth investment. If LTV is $300 and CAC is $100, you generate $300 in revenue to recover $100 in acquisition cost-but after paying for the product, support, infrastructure, and other operating costs (typically 40-70% of revenue in SaaS), you may net only $60-$90 of actual profit. At 3:1, there is enough margin buffer to run a profitable business after all costs. At 2:1, most businesses are break-even or slightly negative after operating expenses. At 1:1, you are guaranteed to lose money at scale. Going above 3:1 is also meaningful: a 5:1 ratio suggests you are under-investing in growth and could acquire more customers profitably. A 10:1 ratio usually means you have strong organic acquisition or network effects and should scale aggressively. Use the ltv-calculator to see your current ratio, then model what it would take-in churn reduction or CAC decrease-to move from a marginal ratio to a healthy one.

Here is a concrete SaaS example. A project management tool charges $49/month. Monthly churn is 4%, so average customer lifespan is 25 months (1 / 0.04). Purchase frequency for a subscription is 12 times per year. LTV = $49 x 12 x 2.08 years = $1,223. If CAC from Google Ads is $350, the LTV:CAC ratio is 3.5:1-healthy. Payback period is $350 / $49 = 7.1 months-within the 12-month target for SaaS. Now, the team runs a retention campaign and cuts churn to 2.5% monthly. Lifespan jumps to 40 months (3.33 years). LTV becomes $49 x 12 x 3.33 = $1,955. Same CAC, but LTV:CAC is now 5.6:1. The company can either increase ad spend or take the margin. Plug your own numbers into the ltv-calculator to see how churn reduction translates to LTV gains, and use the churn-rate-calculator to measure your actual churn rate before entering it.