Customer lifetime value (LTV) calculator

Customer lifetime value is average order value × orders per year × years a customer keeps buying. Swap order value for what each order keeps after product cost and fees, and you get profit LTV: the number to set against what a customer costs you (CAC).

$144Profit LTV on $360 of revenue LTVDemo Brand, made up: $60 order, 2 a year, 3 years

$144Profit LTV per customerKeeps $24 an order after product cost and fees

$360Revenue LTV per customer

6Orders per customer over 3 years

3.6 : 1LTV:CAC on profit9.0 : 1 on revenue

2nd orderCAC paid backMonth 6

$48Most you can pay per customer at 3:1

The first order loses $16 after CAC. Repeat orders pay it back by month 6.

One customer, month by month

RevenueProfitCAC

CAC $40

$120

$48

12 months

$240

$96

24 months

$360

$144

36 months

Cumulative per customer, stopping at the lifespan you enter. Profit is after product cost and fees, before CAC.

How it's calculated

Revenue LTV vs profit LTV.

Most LTV calculators stop at revenue. Ads are paid from what an order keeps, so judging CAC on $360 instead of $144 overstates what Demo Brand can pay by 2.5×.

Revenue LTV

Order value × orders a year × years

Everything one customer spends with you, before any cost.

Profit LTV

(Order value × margin − fees) × lifetime orders

What one customer leaves you to pay for ads and overhead.

LTV:CAC

Profit LTV ÷ CAC

CAC is ad and marketing spend ÷ new customers in the same period.

CAC payback

CAC ÷ profit per order, rounded up

The order that recovers CAC. The first order is month 0.

Payback month = (payback order − 1) × 12 ÷ orders per year. Most CAC at 3:1 = profit LTV ÷ 3.

Worked example · Demo Brand, made up

$360 in sales, $144 kept.

Revenue LTV

$60 × 2 orders a year × 3 years = $360.

Profit per order

$60 × 50% − $6 fees = $24.

Profit LTV

$24 × 6 orders = $144.

Against CAC

$144 ÷ $40 = 3.6:1. On revenue it reads 9:1. Paid back on order 2, month 6.

Raise LTV

Order value, frequency, lifespan.

A third order a year lifts Demo Brand's profit LTV from $144 to $216.

Questions

What founders ask about LTV.

What is LTV?

In ecommerce, LTV (customer lifetime value, or CLV) is what one customer spends with you across every order. In mortgages, LTV means loan-to-value, a different number.

What is a good LTV:CAC ratio?

3:1 on profit is a rule of thumb, not an ecommerce benchmark. It comes from SaaS: David Skok's SaaS Metrics 2.0 (2013) puts the best businesses above 3.

How do I estimate customer lifespan?

Divide 1 by the share of customers you lose each year. Lose 40% a year and the average customer stays 2.5 years. Shopify's customer cohort report shows your real repeat rate.

Should LTV use revenue or profit?

Profit, when you compare it to CAC. Ads are paid from what each order keeps after product cost, shipping and fees, not from sales.

How fast should CAC pay back?

There is no ecommerce standard. Payback on the first order means each sale funds the next; later payback means you carry the gap in cash until repeat orders land.

Keep reading