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Customer Lifetime Value Calculator (LTV)

Enter a few numbers and get your margin-adjusted customer lifetime value and LTV to CAC ratio, instantly and free.

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Customer lifetime value
$672
Revenue per customer
$960
LTV to CAC ratio
4.5:1
Verdict
Healthy

Your margin-adjusted LTV is $672 per customer. At a $150 acquisition cost that is a 4.5:1 LTV to CAC ratio, which is healthy. Aim for 3:1 or better.

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Customer lifetime value (LTV, sometimes CLV) is the total profit one customer generates across the entire time they buy from you. Get it right and every other growth decision gets easier: you know what a customer is worth, so you know what you can afford to spend to win one. The calculator above gives you the margin-adjusted number, which is the honest one, plus your LTV to CAC ratio.

How to calculate customer lifetime value

The formula is straightforward: average purchase value, times purchases per year, times average customer lifespan in years, times gross margin. Say a customer spends $80 per order, buys 4 times a year, stays with you for 3 years, and your gross margin is 70%. That works out to $80 x 4 x 3 x 0.70 = $672 in lifetime profit. The same inputs before margin give $960 in lifetime revenue, which is why the margin step matters so much: it strips out the cost of actually delivering what you sell. Revenue-based LTV flatters the number; margin-adjusted LTV is the one you can reinvest.

LTV to CAC ratio explained

LTV on its own is only half the picture. The other half is what it costs to acquire a customer (CAC). Divide one by the other and you get the LTV to CAC ratio, the single number that tells you whether your growth engine is profitable. A widely used benchmark is 3 to 1: each customer returns about three times what you paid to win them. Below 1:1 you lose money on every sale. Between 1:1 and 3:1 you are profitable but thin. Sitting far above 5:1 is not the trophy it looks like; it usually means you are underspending on acquisition and leaving demand on the table for a competitor to take. The 3:1 to 5:1 band is where most durable businesses want to live.

How to increase customer lifetime value

Three levers move LTV, and they compound. First, retention: keep customers longer and every other input multiplies. A small lift in lifespan often beats a big push on new acquisition. Second, frequency: get customers buying more often through email, reorder reminders, or a subscription option. Third, order value: upsells, bundles, and tiered pricing raise the average purchase. The fourth lever sits on the cost side. Lowering CAC lifts your ratio even when LTV is flat, and organic search is the cleanest way to do it, since organic visitors arrive without a per-click price tag. Pull retention up and acquisition cost down at the same time and the ratio improves from both ends.

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FAQ

Customer lifetime value: questions, answered

What is customer lifetime value?
Customer lifetime value (LTV or CLV) is the total profit a single customer generates across the whole time they buy from you. The margin-adjusted version is: average purchase value x purchases per year x customer lifespan x gross margin. It tells you what one customer is actually worth, not just what they spend.
How do you calculate customer lifetime value?
Multiply average purchase value by purchases per year by average customer lifespan, then multiply by your gross margin. For example, $80 per order, 4 orders a year, a 3-year lifespan and 70% margin gives $80 x 4 x 3 x 0.70 = $672 in lifetime profit per customer.
What is a good LTV to CAC ratio?
A healthy LTV to CAC ratio is about 3 to 1 or better. That means each customer returns roughly three times what you spent to acquire them. Below 1:1 you lose money on every customer. Far above 5:1 can mean you are underspending on growth and leaving demand on the table.
Should LTV use revenue or margin?
Use margin. Revenue-based LTV overstates what a customer is worth because it ignores the cost of delivering the product or service. Margin-adjusted LTV is the honest version: it reflects the actual profit left after costs, which is the number you can reinvest in acquisition.
How does SEO improve customer lifetime value?
SEO lowers customer acquisition cost because organic visitors do not carry a per-click price, which lifts your LTV to CAC ratio even if LTV stays flat. Organic search also brings higher-intent buyers who tend to retain longer, so both halves of the ratio improve at once.

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