Customer Lifetime Value (LTV) Calculator
Calculate customer lifetime value (LTV or CLV) from average order value, purchase frequency, and customer lifespan.
How to use this tool
- Enter average order value, purchase frequency (per year), average customer lifespan and gross margin in the fields above.
- Results update instantly as you type — or click Calculate.
- Read your ltv (revenue) and the full breakdown beneath it.
LTV is the total revenue (or profit) you expect from a single customer over their relationship with your business. It is the cornerstone of sustainable growth — you can spend up to LTV to acquire a customer and still be profitable.
⚠ This tool provides general estimates for education only and is not financial, tax or legal advice. Figures may not reflect your situation — verify with a qualified professional.
Formula
LTV (revenue) = Average order value ($) × Purchase frequency (per year) × Customer lifespan (years)
LTV (gross profit) = LTV (revenue) × Gross margin (%) ÷ 100
How it works
Customer Lifetime Value (LTV or CLV) estimates the total revenue a business expects from a single customer over their entire relationship by multiplying average spend per transaction by how often they buy and how long they remain a customer. A second figure converts that revenue LTV into gross profit using the business's margin percentage.
This model assumes constant purchase frequency and order value over the customer lifespan and does not discount future cash flows; for subscription businesses or those with high churn variation, a discounted cash flow or churn-adjusted model may be more accurate.
Worked example
- Annual revenue per customer: $50 avg order × 12 purchases/year = $600/year
- LTV (revenue): $600/year × 3 years = $1,800
- LTV (gross profit): $1,800 × 60% ÷ 100 = $1,080
A customer spending $50 per order 12 times a year for 3 years generates $1,800 in lifetime revenue and $1,080 in lifetime gross profit at a 60% margin.
Common mistakes to avoid
- Using revenue-based LTV instead of gross-profit LTV when comparing to CAC, which makes unit economics appear far better than they are.
- Estimating customer lifespan as a fixed guess (e.g., '5 years') instead of deriving it from actual churn rate (1 / churn rate).
- Assuming purchase frequency is constant over time rather than accounting for the reality that many customers buy once and never return.
Key terms
- Customer Lifetime Value (LTV / CLV)
- The total revenue or profit a business expects to earn from a customer over the entire duration of their relationship.
- Average order value (AOV)
- The mean dollar amount spent each time a customer completes a purchase, calculated as total revenue divided by number of orders in a period.
- Purchase frequency
- How many times per year an average customer makes a purchase; multiplied by AOV to give annual revenue per customer.
- Customer lifespan
- The average number of years a customer continues to buy from the business before churning or becoming inactive.
- Gross margin
- The percentage of revenue remaining after subtracting the direct cost of goods sold (COGS); applied to revenue LTV to estimate the profit generated per customer.
Frequently asked questions
- What is the difference between revenue LTV and profit LTV?
- Revenue LTV is total expected revenue per customer. Profit LTV (also called CLV) multiplies by gross margin to show how much you actually keep after direct costs. Use profit LTV when comparing against CAC.
- How do I estimate customer lifespan?
- Lifespan ≈ 1 ÷ annual churn rate. If your annual churn is 25%, average lifespan is 4 years. For subscription businesses, use the churn-rate calculator to find this number first.