Customer LTV (Lifetime Value) Calculator
LTV (Customer Lifetime Value) is the total profit generated by a single customer over the entire duration of their relationship with your business. The key benchmark: if LTV exceeds CAC by 3× or more, the business scales profitably.
Frequently asked questions
What is LTV and why does it matter?
LTV (Lifetime Value) is the total profit a single customer generates over the entire duration of your relationship. Knowing your LTV tells you exactly how much you can spend on customer acquisition (CAC) and still remain profitable. LTV > 3×CAC is the standard benchmark for a healthy business.
How is LTV calculated?
The core formula: LTV = Average Order Value × Purchases per Year × Years × Margin. Example: $100 × 4 purchases × 2 years × 40% margin = $320. That figure represents the maximum you can rationally invest to acquire one customer.
How can I increase LTV?
Boost purchase frequency (email marketing, loyalty programs), raise average order value (upsell, bundles), and retain customers longer (customer service improvements, NPS tracking). Reducing churn by just 5% can increase LTV by 25–95%.
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