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profit calculator

Customer Lifetime Value Calculator

Calculate customer lifetime value (LTV) from average purchase value, purchase frequency, customer lifespan, gross margin, and acquisition cost to understand how much each customer is worth over time.

Customer lifetime value

Annual revenue per customer$300
Gross LTV (revenue)$900
Gross margin60%
Net LTV (profit)$540
Customer acquisition cost$40
LTV / CAC ratio13.5x

Each customer generates $900 in revenue over 3 years ($300/year). After 60% margin: $540 in profit per customer. LTV/CAC above 3x — healthy ratio.

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How this calculator works

Annual revenue = purchase value × purchase frequency. Gross LTV = annual revenue × customer lifespan. Net LTV = gross LTV × gross margin %. LTV / CAC ratio = net LTV ÷ acquisition cost. A ratio above 3x is considered healthy.

Useful scenarios

  • A course creator with $100 average purchase, 2 purchases/year, 2-year customer lifespan, 70% margin, and $30 acquisition cost.
  • A SaaS founder with $29/month subscription, 3-year average retention, 80% margin, and $75 acquisition cost.
  • A freelancer with repeat clients averaging $500/project twice a year, 4-year client relationship, 85% margin, and $150 in networking cost per client.

FAQ

What is a good LTV/CAC ratio?

3x or higher is generally considered healthy — you're earning 3× what you spent to acquire the customer. 1-3x means you're barely covering acquisition costs. Below 1x means you're losing money on every customer. Top-performing SaaS companies often have 5x+ ratios.

How do I estimate customer lifespan accurately?

For subscription businesses: 1 ÷ churn rate. If monthly churn is 5%, average lifespan = 1 ÷ 0.05 = 20 months. For one-time purchases, estimate how many years a customer will repurchase based on your repeat purchase data.

Does LTV apply differently to physical vs digital products?

Physical products typically have lower margins (30-50%) and higher purchase frequency. Digital products have higher margins (70-90%) but may have lower frequency. Both benefit from extending customer lifespan through email marketing, loyalty programs, and quality.