Business / Growth
Customer Lifetime Value Calculator (LTV and LTV:CAC)
Estimate what a customer is worth over the whole relationship, from order value, orders a year, gross margin, and retention, and compare it with what it costs to win them.
Customer Lifetime Value Calculator (LTV and LTV:CAC): A customer's yearly margin is the order value times orders a year times the gross margin. With retention r, they stay 1 ÷ (1 − r) years on average, so the lifetime value is the yearly margin times that. A discount rate d counts later years for less: the value becomes margin × (1 + d) ÷ (1 + d − r). Payback is how many months of margin it takes to recover the acquisition cost. Runs 100% locally in your browser with zero server file uploads.
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- Business & admin tools
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- In your browser
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- Free · no sign-up
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- Ready to use
Runs entirely in your browser
At 3 : 1 or better, each customer earns comfortably more than it costs to win.
Lifetime value here is the gross margin a customer brings, not their revenue: what is left to pay for marketing, staff, and profit. A customer stays on average 1 ÷ (1 − retention) years, so 75% retention means about 4 years. A discount rate counts future money as worth less than money today. The 3 : 1 ratio and a payback within 12 months are common rules of thumb, not laws: young companies often run below them on purpose.
A worked example
A shop with average orders of 50, four orders a customer a year, and a 40% gross margin earns 80 a year from each customer. If 75% buy again the next year, customers stay about 4 years, so each is worth 320 in margin. Spending 60 to win one gives an LTV:CAC of 5.3 : 1, paid back in 9 months.
With a 10% discount rate, the same customer is worth 80 × 1.1 ÷ 0.35 ≈ 251.
Using the result
Lifetime value tells you the most you can spend to win a customer and still profit, and which changes matter most: raising retention from 75% to 80% adds a whole year to the average customer.
Averages hide differences: work it out separately for customers from each channel or product where you can. To price your own time instead, see the freelance rate calculator.
How to use it
- Enter the average order value, orders per customer per year, and your gross margin.
- Enter how many customers are still buying a year later, and optionally a discount rate.
- Enter the cost to acquire a customer, and read the lifetime value, LTV:CAC ratio, and payback time.
Privacy & limitations
Your figures stay in your browser and are not sent anywhere.
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Frequently asked questions
What is a good LTV:CAC ratio?
3 : 1 is a common target: each customer earns three times what it cost to win. Far above that may mean you could spend more on growth.
Why use margin instead of revenue?
Revenue includes what the goods themselves cost you; only the margin is left to pay for acquiring customers and running the business.
How do I measure retention?
Take the customers who bought in one year and count how many bought again in the next; for subscriptions, it is 1 minus the yearly churn.
Free tool · runs in your browser · no account required