Customer Lifetime Value Calculator
What is a customer actually worth over time?
Your numbers
Result
Lifetime value
—
How this is calculated
LTV converts repeat purchase behaviour into a single number you can compare against acquisition cost. This calculator uses margin rather than revenue, because revenue-based LTV is the reason so many stores convince themselves unprofitable growth is working.
- Contribution per order = average order value × contribution margin %
- First-year contribution = contribution per order × orders per year
- Expected customer life (years) = 1 ÷ annual churn rate
- LTV = first-year contribution × expected customer life
- LTV : CAC = lifetime value ÷ customer acquisition cost
What to make of the number
An LTV:CAC ratio between 3:1 and 5:1 is generally considered the zone where growth can be funded confidently. Above 5:1 you are probably underinvesting in acquisition; below 3:1 growth consumes cash faster than it creates it, and the constraint will be working capital rather than demand.
Frequently asked questions
Why should LTV be based on margin rather than revenue?
Because revenue overstates what a customer is worth. If your contribution margin is 40%, a customer generating $500 of revenue contributes $200 — and comparing $500 against a $150 CAC makes a marginal business look excellent.
How do I estimate churn for an ecommerce store?
Pick a cohort of customers acquired in a given period and measure what share placed no further order within 12 months. For newer stores, use the repeat purchase rate over a shorter window and extrapolate carefully rather than assuming.
What is a good LTV to CAC ratio?
Around 3:1 is the usual minimum for sustainable growth. Much above 5:1 often suggests you could profitably spend more on acquisition than you currently are.
Why does CAC payback matter if LTV is healthy?
Because LTV takes time to arrive and bills are due now. A business with a 30-month payback can be profitable on paper and still run out of cash. Payback under about 12 months is generally comfortable.
Does LTV apply to marketplace sellers?
It matters less on pure marketplaces where you do not own the customer relationship and cannot market to them again. In that case treat each order on its own unit economics rather than assuming repeat value you cannot influence.