Customer lifetime value calculator
Customer lifetime value is the profit you expect from an average customer over the whole relationship. Enter the average order, how often they buy, your margin and yearly retention. Add what it cost to win them to see the LTV to CAC ratio and the payback time.
Runs in your browser: nothing you enter is sent anywhere.
How to use it
- Enter the average order value and purchases per year.
- Enter your gross margin and yearly retention.
- Optionally add a discount rate and the cost to acquire a customer.
How it works
- Margin per year = order value × purchases per year × margin ÷ 100.
- Lifespan = 1 ÷ (1 − retention) years; CLV = margin per year × lifespan.
- With a discount rate d: CLV = margin × (1 + d) ÷ (1 + d − retention).
- LTV : CAC = CLV ÷ acquisition cost; payback = acquisition cost ÷ (margin per year ÷ 12).
Worked example
Orders of 50, four a year, 40% margin: 80 a year. With 80% retention the lifespan is 5 years and CLV is 400. At an acquisition cost of 100 the ratio is 4 : 1 and payback is 15 months. At a 10% discount rate CLV falls to 293.33.
Tips
- Use the margin, not revenue, or CLV is overstated.
- Retention near 100% makes CLV explode; keep it realistic.
- Results are estimates, not financial advice.
Frequently asked questions
How is lifetime value calculated?
Margin per year = order value × purchases per year × margin. Expected lifespan = 1 ÷ (1 − retention) years. CLV = margin per year × lifespan. With 50 × 4 × 40% = 80 a year and 80% retention, the lifespan is 5 years and CLV is 400.
What does the discount rate do?
It reduces the value of later years: CLV = margin × (1 + d) ÷ (1 + d − retention). The first year counts in full. Leave it at 0 for the plain version.
What is a good LTV:CAC ratio?
A common rule of thumb is about 3 to 1 or more, but it depends on your business, margins and cash. It is a guide, not a rule.
How is payback computed?
Acquisition cost ÷ monthly margin per customer. It ignores churn within the period, so real payback may be slightly longer.
Is this financial advice?
No. It is a model that assumes steady averages. Real customers vary; use cohorts from your own data for decisions.