Business
Customer Lifetime Value Calculator
Average order, orders per year, years they stay, and margin — a simple LTV.
What is a customer worth?
This is the back-of-desk version of LTV: it assumes customers stay for the period you enter and that margin stays roughly steady. Churn curves and discounting belong in a richer cohort model once you have data. Use it to sanity-check ad spend and CAC, not to close the books. Prefer contribution after variable costs when comparing to CAC — revenue-only LTV overstates what you can spend to acquire. Feed the result into LTV to CAC, build CAC with customer acquisition cost, and set media floors with break-even ROAS. Early-stage products should treat LTV as a hypothesis with wide error bars. Estimates only — not investment advice. Marketplace sellers should net refunds out of average order value before they celebrate a handsome LTV. B2B teams with long sales cycles may prefer annual contract value times expected renewals instead of order-frequency language. Document whether LTV is measured on revenue or contribution so growth and finance stop arguing past each other in weekly stand-ups.
Worked example
Average order £45, purchase three times a year, gross margin after variable costs 55%, expected active life 2.5 years. Approximate LTV = 45 × 3 × 2.5 × 0.55 = about £185. If CAC is £70, the ratio is roughly 2.6:1 — workable for some retail models, tight for cash-constrained subscription growth without strong retention.
Limits and assumptions
Ignores churn curves, discount rates and expansion revenue. Refunds and payment fees should already sit in the margin you enter. Not a discounted-cash-flow valuation of the company.
Frequently asked questions
What inputs does simple LTV need?
Average order value or periodic revenue, purchase frequency or lifespan, and gross margin after variable costs.
Why ignore churn curves here?
This tool favours speed and clarity. Once you have cohort data, upgrade to a discounted churn model offline.
Should LTV be revenue or profit?
Prefer contribution after variable costs when comparing to CAC — otherwise you overstate what you can spend to acquire.
How do subscriptions differ?
Use average monthly contribution × expected months retained, and update as churn data arrives.
Can I include referral value?
Only with a conservative estimate — viral loops are easy to overstate in early LTV sketches.