LTV Calculator
Calculate customer lifetime value from average order value, purchase frequency, customer lifespan and gross margin — both as revenue and as gross profit.
- LTV (revenue)
- $680.00
- Revenue per customer per year
- $272.00
- Orders over lifetime
- 8
Results update as you type. Values are kept in the URL, so you can share or bookmark this exact calculation.
Formula
LTV (revenue) = Average order value × Purchases per year × Lifespan (years) LTV (gross profit) = LTV (revenue) × Gross margin Lifespan (years) ≈ 1 ÷ Annual churn rate
How to read LTV
Lifetime value answers how much a customer is worth over the whole relationship, not just the first order. The revenue version is useful for growth planning; the gross-profit version is the one to compare against acquisition cost, because you can only spend profit on acquiring the next customer.
The weakest input is lifespan. If you do not have cohort data, estimate it as one divided by annual churn: 40% of customers lost each year means a 2.5-year average lifespan. Be conservative — LTV models are usually wrong in the optimistic direction.
Frequently asked questions
- Should LTV include gross margin or not?
- Both are reported here because they answer different questions. Revenue LTV shows the size of the relationship; gross-profit LTV shows what you can afford to spend. When someone quotes an LTV:CAC ratio, check which one they used — a 3:1 ratio on revenue can be 1.3:1 on profit.
- How do I get purchase frequency and lifespan from my data?
- Frequency = total orders in a year ÷ unique customers who ordered that year. Lifespan = average months between a customer's first and last order (for churned customers), or 1 ÷ annual churn for a quick estimate.
- Does LTV need discounting for time?
- For lifespans under two or three years the difference is small and most marketing teams ignore it. For subscription businesses with long lifespans, discount future years at your cost of capital or the ratio will overstate what you can spend today.