Customer Lifetime Value Calculator

LTV is the total revenue — or gross profit — a customer generates over their entire relationship with your business. It helps you decide how much you can afford to spend acquiring customers.

The simple formula is Average order value × purchase frequency × customer lifespan. For subscriptions, a common approach is ARPU ÷ monthly churn rate. Multiply by gross margin to get gross-profit LTV.

Revenue LTV is the total revenue a customer brings. Gross-profit LTV multiplies that by your gross margin, so it reflects the actual profit available to cover acquisition and operating costs — usually the more meaningful figure for unit economics.

LTV depends heavily on how long customers stay. Small improvements in retention (lower churn or longer lifespan) compound into large increases in LTV, which is why retention is often the highest-leverage growth lever.

For a subscription business, average customer lifespan is roughly 1 divided by the churn rate. At 5% monthly churn, the average customer stays about 20 months; cut churn to 2.5% and that lifespan doubles to about 40 months. Because LTV scales directly with lifespan, halving churn can nearly double LTV. This inverse relationship is why even a small reduction in churn is so valuable — it lengthens every future customer relationship at once.

For long customer relationships, ideally yes. A dollar of profit you will collect three years from now is worth less than a dollar today, so a strictly rigorous LTV discounts future cash flows back to present value. In practice, many businesses use a simpler undiscounted LTV for quick decisions, which is fine over short horizons but can overstate value for very long-lived customers. If your customers stay for many years, applying a discount rate gives a more honest number.

LTV sets the ceiling on what you can afford to pay for a customer. Once you know a customer's gross-profit LTV, you work backward: decide the LTV:CAC ratio you need to cover overheads and profit — often around 3:1 — and that fixes your maximum sustainable CAC. So a $720 gross-profit LTV at a target 3:1 ratio means you can spend up to about $240 to acquire a customer. This is how LTV turns from an abstract metric into a concrete spending rule.