Customer Value
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Customer Lifetime Value Calculator Guide
Lifetime value is the total profit one customer brings over the whole relationship — not just their first order. It's the number that decides how much you can afford to spend winning them.
Purchase-based: LTV = Average order value × Purchases per year × Years × Gross margin
Churn-based: LTV = (Monthly revenue × Gross margin) ÷ Monthly churn rate
The Mistake That Costs Most
Valuing a customer at their first purchase. Someone who spends $120 once is worth $120. Someone who spends $120 four times a year for three years is worth $1,440 in revenue. Same first order, twelve times the value.
If your competitor counts the full relationship and you count the first sale, they can outbid you on every keyword and still profit. They aren't being reckless — they're doing the arithmetic you skipped.
Use Margin, Not Revenue
Revenue LTV is a vanity number. A customer generating $1,440 of revenue at a 60% margin gives you $864 of gross profit — and $864 is what you actually have to spend on acquiring them, servicing them, and keeping the lights on.
The Churn Formula, Explained
For subscriptions, the neat trick is that average customer lifetime is simply 1 ÷ churn rate. A 5% monthly churn means the average customer stays 20 months. Multiply that by monthly gross profit and you have LTV.
This is also why churn matters so much: dropping monthly churn from 5% to 3% stretches average lifetime from 20 months to 33 — a 67% increase in LTV without acquiring anyone new. Check yours with our churn rate calculator.
Be Honest About Lifespan
Use your real retention data, not your best cohort ever. And remember money arriving in year four is worth less than money today — proper LTV models discount future cash flows. This calculator doesn't, which makes its answer slightly optimistic for long lifespans. That's a reasonable simplification for planning, and worth knowing when the number looks great.
What to Do With It
LTV sets your acquisition ceiling. At the common 3:1 benchmark, an $864 LTV supports a CAC of about $288. Compare against our CAC calculator to see whether your current spend is sustainable.
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