Free Online Customer Lifetime Value Calculator
Estimate CLV, CAC ratio, and customer profitability.
A common rule of thumb is that lifetime value should be at least three times acquisition cost.
About the Customer Lifetime Value Calculator
Customer lifetime value estimates how much gross profit a customer produces over the whole relationship. It changes how much you can afford to spend on acquisition. If a customer is worth a hundred dollars in margin, a twenty-dollar acquisition cost is easy to justify; if the value is fifteen dollars, the same cost is a loss. This calculator combines average order value, purchase frequency, lifespan, and gross margin to produce a lifetime value, then compares it with customer acquisition cost.
The core formula is average order value multiplied by purchases per year, multiplied by lifespan in years, and then multiplied by gross margin as a percentage. The result is gross profit, not revenue. A customer who spends four hundred dollars over their life at a 45 percent margin is worth one hundred eighty dollars in product contribution. The lifetime revenue card shows the larger revenue figure for context, but acquisition decisions should use the profit figure because revenue has to pay for the product first.
The LTV to CAC ratio divides lifetime value by acquisition cost. A ratio of three or higher is a common target, meaning each dollar spent on acquisition returns three dollars of gross profit over time. A ratio below one means the customer does not recover the cost of acquisition. Payback months divide CAC by monthly gross profit per customer, which shows how long the business waits before the relationship turns cash-positive. Long payback periods strain cash flow even when the lifetime ratio looks healthy.
These are averages. A blended CAC hides differences between channels, and a blended lifespan hides churn patterns. High-value segments can justify much higher acquisition costs than the average suggests. The model also ignores discounting, inflation, referrals, and expansion revenue. Use it as a planning estimate, then replace the averages with cohort data when you have it. All calculations are local, and the currency selector only changes formatting.
Segment the calculation before making budget decisions. New customers, loyal repeat buyers, and wholesale accounts can have very different order values, frequencies, and lifespans. A blended average can hide a segment that is unprofitable and another that deserves more investment. Sensitivity matters too: a small change in annual churn or margin can move lifetime value substantially. Recalculate with cohort data every quarter, and treat the result as a range rather than a single precise number.
How to use this tool
- Enter average order value, purchase frequency, and expected lifespan.
- Add gross margin and the cost to acquire one customer.
- Review lifetime value, LTV:CAC, payback months, and net value.
- Copy the summary for a budget or marketing plan.
Frequently asked questions
Is lifetime value revenue or profit?
This calculator reports gross profit: revenue after the direct cost of goods, before ad spend. That is the number to compare with acquisition cost.
What is a good LTV:CAC ratio?
Three to one is a common benchmark. Below one means acquisition loses money. Very high ratios can mean you are underinvesting in growth.
How do I estimate lifespan?
Use the average number of years a customer remains active, or the inverse of annual churn. If annual churn is 25 percent, the average lifespan is roughly four years.