Customer lifetime value calculator

Name: LTV calculator (customer lifetime value)
Author: Richard Injante

How much margin a customer leaves across the whole relationship.

Content reviewed by Richard Injante Published by SolucionesAhora.com Updated on 2026-10-27 How we verify

Calculator inputs

Results

Enter your values and press “Calculate” to see the result.

Free, no sign-up! What if you could do this without a calculator? A five-minute game with challenges, lives and points. It clicks even when you cannot be bothered.

In short

What it calculates: How much margin a customer leaves across the whole relationship.
Formula used: Revenue = order value × frequency × years
Example: £60 order value, 4 purchases a year, 3 years and a 45% margin:

LTV calculator (customer lifetime value)

LTV puts a figure on something most people only sense: a customer is not worth what they buy today, but everything they will leave while they stay.

It is the number that tells you how much you can afford to spend on acquisition.

How it works

Average order value, annual frequency and years retained are multiplied together, then gross margin is applied to move from revenue to profit.

Formula

Revenue = order value × frequency × years

LTV = revenue × margin

Maximum CAC ≈ LTV ÷ 3

Worked example

£60 order value, 4 purchases a year, 3 years and a 45% margin:

Revenue: £720
LTV: £324
Recommended maximum CAC: £108

Explanation

On margin, never on revenue

A customer spending a thousand at a twenty per cent margin contributes two hundred, not a thousand. Calculating lifetime value on revenue inflates the figure up to fivefold and makes an acquisition cost look sustainable when it actually generates losses. It is the error that has sunk most subscription businesses.

Churn rate governs everything

Lifetime value is roughly the monthly margin divided by the monthly cancellation rate. Cutting churn from five to three per cent multiplies lifetime value by 1.67 without touching the price or winning a single extra customer. That is why retention usually pays far better than acquisition.

Discount the future

A hundred in three years is not worth a hundred today. In businesses with long customer lifetimes, apply a discount rate, or the calculation overvalues revenue that may never arrive. Many teams also cap the horizon at twenty-four or thirty-six months out of prudence.

Not all customers are worth the same

Averaging hides that a small group usually contributes most of the value. Segmenting by acquisition channel, plan or sector reveals where investment pays and where acquisition cost is never recovered.

Frequently asked questions

Should I use margin or revenue?

Margin. LTV based on gross revenue inflates the figure and leads to overpaying for customers.

How do I increase LTV?

By raising order value, purchase frequency or retention. Keeping customers is usually cheaper than winning new ones.

Should lifetime value use revenue or margin?

Margin. Using revenue inflates the figure and can make an acquisition cost look profitable when it generates losses.

How do I increase customer lifetime value?

Reducing churn has the biggest effect. Raising price or cross-selling also works, but retaining is usually cheaper than acquiring.

Need to calculate something else?

These tools are often used alongside this calculator.