Customer LTV Calculator

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This customer LTV calculator estimates how much a typical customer is worth over their relationship with your brand, and how quickly they pay back what you spent to acquire them. Enter average order value, gross margin, orders per customer per year and expected lifespan. Add your CAC and it also returns the LTV:CAC ratio and the payback period in months.

LTV is what decides how much you can afford to spend on a first order. A brand that knows customers return three times can bid harder on acquisition than a competitor guessing, and still stay profitable.

How do you calculate customer lifetime value?

Multiply average order value by orders per customer per year and by expected lifespan in years to get revenue LTV. Multiply that by gross margin to get gross-profit LTV. A customer spending $70 per order, 2.5 times a year for 2 years, is worth $350 in revenue and $210 in gross profit at a 60% margin.

Customer LTV calculator

Inputs: Average order value ($), Gross margin (%), Orders per customer per year, Expected customer lifespan (years), CAC ($). The calculator runs in your browser; nothing is stored.

How to use the LTV calculator

Base the inputs on real customer cohorts where you can. A customer group acquired at least 12 months ago gives a more honest view of repeat behaviour than last month's buyers.

Average order value: average revenue per order across all of a customer's orders, after discounts.
Gross margin %: revenue minus product cost as a percentage of revenue. Include fulfilment if you want a stricter profit view.
Orders per customer per year: total orders in a year divided by unique customers in that year, taken from your Shopify customer data.
Expected customer lifespan in years: how long a typical customer keeps buying. Be conservative; two years is a safer starting point than five for a young brand.
CAC (optional): your fully loaded acquisition cost per new customer, from the CAC calculator.

The LTV formula with a worked example

Revenue LTV = AOV x orders per year x years

Gross-profit LTV = revenue LTV x gross margin %

LTV:CAC = gross-profit LTV / CAC

Payback (months) = CAC / (AOV x gross margin % x orders per year / 12)

Example: a supplement brand has a $70 AOV, a 60% gross margin, customers who order 2.5 times a year and an expected lifespan of 2 years. Revenue LTV is $70 x 2.5 x 2 = $350. Gross-profit LTV is $350 x 0.60 = $210. With a CAC of $60, LTV:CAC is $210 / $60 = 3.5.

For payback, monthly gross profit per customer is $70 x 0.60 x 2.5 / 12 = $8.75. Payback is $60 / $8.75 = about 6.9 months. The brand gets its acquisition cost back in just under seven months, then earns profit for the rest of the customer's life.

Output	Example value
Revenue LTV	$350
Gross-profit LTV (60%)	$210
LTV:CAC (CAC $60)	3.5
Monthly gross profit per customer	$8.75
Payback period	About 6.9 months

How to read the result

Use gross-profit LTV, not revenue LTV, when deciding what you can spend to acquire a customer. Revenue LTV looks impressive in a pitch deck but ignores the cost of the products you ship.

LTV:CAC tells you how much value each acquisition dollar creates over time. Payback tells you how long your cash is tied up. Two brands can share the same ratio while one waits four months for payback and the other waits eighteen. The shorter the payback, the faster you can reinvest and scale. Our glossary entry at /glossary/ltv covers cohort-based LTV in more depth.

What to do next

The quickest LTV gains usually come from retention, not acquisition. Post-purchase email and SMS flows, replenishment reminders and loyalty offers all raise orders per year without extra ad spend.

Get an accurate CAC first with the CAC calculator at /tools/cac-calculator.
Compare acquisition efficiency with the ROAS calculator at /roas-calculator.
If orders per year are low, our retention marketing team at /retention-marketing-agency builds Klaviyo flows that bring customers back.

Common mistakes

LTV is a forecast, and forecasts drift toward optimism. The inputs that matter most, order frequency and lifespan, are also the hardest to measure for a young brand. Revisit the calculation every quarter as your cohorts age and replace assumptions with real repeat-purchase data. The mistakes below are the ones that most often turn a careful LTV estimate into a number that justifies overspending on acquisition before customers have proven they will come back.

Using revenue LTV against CAC, which overstates how much you can afford to spend.
Assuming a long lifespan before you have customers old enough to prove it.
Using order frequency from your best customers instead of all customers, including one-time buyers.
Forgetting that discounts on repeat orders lower AOV and margin for returning customers.

Proof from real accounts

$1.6M Year in sales: A DTC brand that reached the $1.6M year mark (see the proof)
€118,000 First month: Scaling a UK skincare brand (see the proof)
12+ Years in ecommerce: Across our client accounts in 30+ niches

Frequently asked questions

What is a customer LTV calculator?

A customer LTV calculator estimates the total revenue and gross profit a typical customer generates over their relationship with your brand. It multiplies average order value by purchase frequency and lifespan, then applies your margin. Adding CAC shows whether that value is high enough to justify what you pay to acquire each customer.

Should I use revenue LTV or gross-profit LTV?

Use gross-profit LTV for any spending decision. Revenue LTV ignores the cost of goods, so comparing it with CAC makes acquisition look more profitable than it is. Revenue LTV is fine for describing customer value in general terms, but budget and bidding decisions should rest on gross profit.

What is a good LTV to CAC ratio?

It depends on your margins, cash position and growth goals, so there is no single right answer. A ratio above 1 means a customer eventually returns more gross profit than they cost. Higher ratios give more room for overheads and profit. Pair the ratio with payback period, since cash tied up for a long time limits growth.

How do I estimate customer lifespan for a new brand?

Start conservatively. Look at how many customers from your oldest cohorts are still ordering, and use a short lifespan such as one or two years until you have more data. Overestimating lifespan inflates LTV and can lead you to overspend on acquisition before repeat purchases have proven themselves.

How can I increase customer lifetime value?

Raise purchase frequency with replenishment reminders, post-purchase flows and subscriptions. Raise order value with bundles and upsells. Protect margin by limiting deep discounts to returning customers. Improve the product experience so fewer customers churn after the first order. Each change lifts gross-profit LTV and shortens the payback period on acquisition.

Want customers who come back?

Book a Brand Growth Audit. We look at acquisition and retention together so your ad spend is set against what customers are really worth. Book a Brand Growth Audit.