Lifetime Value
Lifetime Value (LTV or CLV) is the total revenue a business can expect from a single customer relationship. It is the counterpart to CAC — together they define unit economics. Our calculator supports both the simple formula and the more accurate discounted cash flow (DCF) model that accounts for the time value of money.
Average revenue earned per transaction
How many times a typical customer buys per year
Average number of years a customer stays with you
Optional — for deeper insights
Used to calculate Profit LTV
Used to calculate the LTV:CAC ratio
Customer Lifetime Value
Revenue over the customer's lifetime
What Is Customer Lifetime Value and Why It Matters
Customer Lifetime Value (LTV or CLV) is the total revenue you can expect from a single customer over the entire duration of their relationship with your business. It's one of the most important metrics for any company because it directly answers the question: how much can I afford to spend to acquire a new customer?
The formula is straightforward: LTV = Average Purchase Value × Purchase Frequency × Customer Lifespan. If a customer spends $150 per order, buys 4 times a year, and stays for 3 years, their LTV is $1,800.
Businesses that know their LTV can confidently invest in marketing, offer discounts to retain customers, and price their products strategically. Without it, you're guessing at one of the most critical numbers in your business model.
LTV:CAC Ratio — The Metric That Defines Business Health
The LTV:CAC ratio compares what a customer is worth to what it costs to acquire them. A ratio of 1:1 means you break even on every customer — there's no room for operating costs or profit. A ratio below 1:1 means you're losing money on each acquisition.
The benchmark most investors and operators use is 3:1 — your LTV should be at least 3 times your CAC. If your ratio is much higher than 3:1, it may mean you're under-investing in growth. If it's lower than 3:1, focus on improving retention, raising prices, or lowering acquisition costs.
Tracking this ratio over time tells you whether your business is becoming more or less efficient. Growing companies often see their LTV:CAC improve as word-of-mouth increases and CAC drops while LTV stays steady or rises.
About the Customer Lifetime Value (LTV) Calculator
Lifetime Value (LTV or CLV) is the total revenue a business can expect from a single customer relationship. It is the counterpart to CAC — together they define unit economics. Our calculator supports both the simple formula and the more accurate discounted cash flow (DCF) model that accounts for the time value of money.
How to use it
- Enter average revenue per user per month (ARPU) and average customer lifespan in months.
- Or enter average order value, purchase frequency, and churn rate.
- Enter your gross margin to see Gross Profit LTV (what actually matters for CAC comparison).
- Use DCF mode to account for the fact that future revenue is worth less than present revenue.
Formula & methodology
Simple LTV = ARPU × average customer lifespan (months). Churn-based: LTV = ARPU ÷ monthly churn rate. Gross Profit LTV = LTV × gross margin. DCF LTV = Σ(monthly revenue × gross margin / (1 + discount rate)^month). LTV:CAC = Gross Profit LTV ÷ CAC. Target: LTV:CAC > 3.
Common use cases
- Determining maximum sustainable CAC for profitability
- Segmenting customers by LTV to focus retention on high-value accounts
- Product pricing: higher LTV allows premium pricing and more CAC budget
- Cohort analysis: comparing LTV across acquisition cohorts and channels
- Investor materials: demonstrating unit economics viability
Frequently asked questions
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