An LTV:CAC ratio of 3:1 or more is often considered healthy: each customer brings in three times what it costs to win them. Improving retention usually raises CLTV more than raising prices.
How to use the CLTV Calculator – Customer Lifetime Value
- Average purchase value
- Purchases per year
- Lifespan from
- Customer lifespan
- Yearly churn rate
- Gross margin
- Customer acquisition cost (CAC)
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the average purchase value, purchases per year, customer lifespan (or churn), gross margin and customer acquisition cost.
Tips
- Know the difference between margin (profit ÷ price) and markup (profit ÷ cost).
- Apply successive discounts one after another – they do not simply add up.
- Check whether prices already include sales tax or VAT.
- Round prices only at the very end of the calculation.
Common mistakes to avoid
- Adding discount percentages together.
- Pricing from a target margin using the markup formula.
- Forgetting payment-processing and shipping fees.
Inputs explained
| Field | What to enter |
|---|---|
| Average purchase value | Amount in your currency |
| Purchases per year | A number |
| Lifespan from | Choose one: Years, Yearly churn rate |
| Customer lifespan | In years |
| Yearly churn rate | In % |
| Gross margin | In % |
| Customer acquisition cost (CAC) | Amount in your currency |
What each result means
- Customer value per year = [Average purchase value]×[Purchases per year]
- Customer lifetime value (revenue) = [Customer value per year]×[Customer lifespan]
- Lifetime gross profit = [Customer lifetime value (revenue)]×[Gross margin]÷100
- LTV:CAC ratio = [Lifetime gross profit]÷[Customer acquisition cost (CAC)]
Example values
How the main result changes when Average purchase value changes and everything else stays at the example values above:
| Average purchase value | Customer lifetime value (revenue) |
|---|---|
| 30 | 600 |
| 45 | 900 |
| 60 | 1,200 |
| 75 | 1,500 |
| 90 | 1,800 |
| 120 | 2,400 |
Formula
Customer value per year = average order value × purchases per yearLifespan = 1 ÷ yearly churn (if using churn)CLTV (revenue) = value per year × lifespanCLTV (profit) = CLTV × gross margin; LTV:CAC = profit CLTV ÷ CACWorked example
Inputs — Average purchase value: $60; Purchases per year: 5; Lifespan from: Years; Customer lifespan: 4 years; Yearly churn rate: 25 %; Gross margin: 40 %; Customer acquisition cost (CAC): $80.
Results — Customer value per year = $300.00; Customer lifespan = 4 years; Customer lifetime value (revenue) = $1,200.00; Lifetime gross profit = $480.00; LTV:CAC ratio = 6.
Frequently asked questions
What is a good CLTV?
Any CLTV well above your acquisition cost – aim for LTV:CAC of 3:1 or more.
How can I increase CLTV?
Improve retention, encourage repeat purchases and upsell.
Should CLTV use revenue or profit?
Profit is more useful for decisions about acquisition spending.
What formula does the CLTV Calculator – Customer Lifetime Value use?
Customer value per year = average order value × purchases per year.