What is LTV?
LTV, or customer lifetime value, is the total revenue a business can expect from one customer over the whole relationship. A simple estimate multiplies average order value by purchases per year and by years as a customer.
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How to calculate LTV
Multiply your average order value by the number of orders per year and the number of years a customer stays.
Why LTV matters
LTV tells you how much a customer is worth over time, not just on the first sale. That shows how much you can afford to spend to win and keep them.
It's most useful alongside CAC. Together they show whether your acquisition spending is likely to pay off.
Revenue-based versus profit-based LTV
The example above uses revenue. Many teams multiply by gross margin to get a profit-based LTV, which is a more careful figure to compare with CAC.
Subscription businesses often estimate lifespan from the churn rate. Whichever method you use, apply it consistently.
Limits of LTV
LTV is an estimate, and it depends on assumptions about how long customers stay and how much they buy. New businesses have little data, so early figures may be rough.
Disclaimer
This calculator is for informational purposes only, and we don't guarantee the accuracy of its results. You're responsible for verifying any results before relying on them. See our terms of use.
Common questions
How do you calculate LTV?
Multiply average order value by orders per year and by years as a customer. For example, $50 times 4 orders times 3 years gives a $600 LTV.
What is the difference between LTV and CLV?
They mean the same thing. LTV stands for lifetime value and CLV for customer lifetime value.
How can you increase LTV?
Improve retention, encourage repeat purchases, and raise order value through upsells and cross-sells. Better onboarding and support can also keep customers longer.
Should LTV use revenue or profit?
Profit gives a more reliable view of what a customer is worth, because revenue ignores the cost of serving them. Use the same basis whenever you compare LTV with CAC.
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