LTV & LTV:CAC Calculator

What is a customer worth?

A $50 first order might be worth $320 over time. Know your customer lifetime value (LTV) to set smarter ad budgets.

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Customer value inputs

$
Average Order Value. The average amount a customer spends per order. D2C average: $70-$120.
$
Customer Acquisition Cost (CAC). How much you spend on average to acquire one new customer, including ad spend and marketing costs. Healthy LTV:CAC: 3:1 or higher.
Purchase Frequency. How many times the average customer purchases per year. D2C average: 1.5-3x/year.
Years to Model. How many years of buying to count. Your retention rate handles customers leaving inside this window, so lifetime revenue and gross profit grow more slowly with each extra year.

Your retention rate handles customers leaving inside these years.

%
Gross Margin. The share of revenue left after product and shipping costs — before ads, overhead, or salaries. Healthy D2C: 50%+.
Lifetime gross revenue, after retention$383

Optional: Advanced Calculations

%
Retention Rate. Percentage of customers who return for another purchase each year. Good retention: 30-50%.
%
Discount Rate. Financial discount rate to calculate present value of future revenue. Default: 10%.
How to use this calculator

Example numbers · Lifetime Gross Profit (retention-adjusted, today’s dollars)

$88Good

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Customer lifetime value

Lifetime Gross Profit per Customer

LTV:CAC2.9:1$88 Present Value LTV ÷ $30 CAC · See the formulaWorkable · target 3:1

$88

Retention-adjusted, today’s dollars: your Present Value LTV. What’s left after gross margin, before acquisition costs and overhead. LTV:CAC and payback are worked from this figure.

What we’d check next

We’d check how long repeat purchases take to pay back what each customer costs to win.

View chart and context

At 3:1, a customer worth $88 can cost up to $29 to win.

LTV:CAC 2.9:13 months to recover

Revenue per customer, after retention, $383, rated Good against revenue benchmarks.

Values update as you type.

LIFETIME VALUE BREAKDOWN

Your results

Total Lifetime Purchases

4.5

LTV:CAC Ratio

2.9:1

Target: 3:1 or higher

CAC Payback

3 months

Months to recover acquisition cost
BENCHMARK

How you stack up

Directional D2C planning band, not measured. Lifetime value needs a repeat-purchase window nobody here has measured consistently, so this is a chosen anchor. Treat it as a starting point and compare against your own cohort data. Benchmarks are directional, not a guarantee; use them as a comparison point alongside your own historical data.

You vs. the planning band

Revenue per customer, for benchmarking

$383

Planning band

A chosen anchor, not measured

Published LTV benchmarks are revenue figures, so this compares order value × the orders you expect over the years modelled, after retention and before margin. The headline above is gross profit.

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SEE HOW YOU COMPARE

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How we calculate the lifetime value of your customers.

Simple LTV
AOV × Purchase Frequency × Lifespan × Gross Margin %

Example: $75 × 4 × 3 × 60% = $540

Annual Gross Profit
AOV × Purchase Frequency × Gross Margin %

Example: $75 × 4 × 60% = $180/year

Monthly Gross Profit
Annual Gross Profit ÷ 12

Example: $180 ÷ 12 = $15/month

Advanced LTV (retention curve)
Sum over each year you model: Annual Gross Profit × Retention %^(year − 1)

Example: $180 + ($180 × 0.8) + ($180 × 0.8²) = $439.20

Present Value LTV (discounted)
First-order gross profit + sum over each year: the rest of that year’s retained gross profit ÷ (1 + Discount %)^(year − ½)

Example: $45 + $135÷1.1^0.5 + $144÷1.1^1.5 + $115.20÷1.1^2.5 = $389.31

LTV:CAC Ratio
Lifetime gross profit (present value if you gave a discount rate, else retention-adjusted, else simple) ÷ CAC

Example: $389.31 ÷ $150 = 2.6:1 (workable)

CAC Payback (months)
Months until first-order gross profit plus the rest, accruing evenly through each year, covers CAC. If the first order covers it: paid back on the first order.

Example: $45 at month 0, then $128.72 over year one: ($150 − $45) ÷ $10.73 = 9.8 months

Total Lifetime Purchases
Purchase Frequency × sum over each year of Retention %^(year − 1)

Example: 4 × (1 + 0.8 + 0.64) = 9.8 orders (4 × 3 = 12 with no retention rate)

More things we’d check

We’d use observed repeat purchases and a realistic customer lifespan for this estimate.

We’d compare acquisition cost with the gross profit the customer brings back, including how long that takes.

We’d review the emails after the first order.

Read the email flows guide

About LTV and LTV:CAC

What is LTV:CAC?

LTV (lifetime value) is the profit a customer brings you across every order they ever place. CAC (customer acquisition cost) is what you spent to win them. LTV:CAC puts the two side by side: what a customer is worth vs. what it cost to get them. It tells you how much you can afford to spend winning the next one.

Formula

LTV = order value × orders per year × years as a customer × gross margin

Then LTV:CAC = LTV ÷ CAC. Use profit, not revenue, or every ratio looks rosier. If you add a retention rate, the years become the window to model and retention handles customers leaving inside it, so don’t shorten the years as well.

A worked example

  1. A customer spends $85 an order, orders 2.5 times a year and stays 2 years. That is $425 of revenue.
  2. You keep 25% after product costs, so their LTV is $425 × 25% = $106.25.
  3. You paid $35 to win them. $106.25 ÷ $35 = 3.0:1, which lands in Healthy on the ladder.
  4. Their first order earns back $21.25 of it straight away, and their later orders cover the rest in about 5 months.

What’s a good LTV:CAC?

Below 1:1 each new customer loses you money. Past that, the question is how much room you have left to pay for overheads and growth. This is the ladder our calculators grade against:

Under 1×
Unprofitable.
1–2×
Thin.
2–3×
Workable.
3×+
Healthy.

A very high ratio isn’t automatically good news. It can mean you are under-spending on customers you could profitably win.

LTV vs LTV:CAC vs payback

  • LTV on its own says what a customer is worth, but not whether you paid too much for them.
  • LTV:CAC adds the cost, so it tells you whether winning customers makes money at all.
  • CAC payback is how many months of profit it takes to earn back that cost. Two stores with the same ratio can wait very different lengths of time for their cash.
  • Break-even ROAS turns the same margin into the ad return you need on a first order. Find your break-even point with the ROAS calculator
FAQ

Frequently asked questions

Common questions about customer lifetime value and retention

This calculator estimates lifetime gross profit: average order value × purchases per year × customer lifespan × gross margin. It excludes acquisition costs and overhead. We’d use it as a planning estimate, not an amount you can safely spend to acquire every customer.

Compare estimated lifetime gross profit with customer acquisition cost (CAC), using compatible customer groups and periods. A ratio of 1:1 leaves nothing from that gross profit for overhead. A higher ratio alone does not justify more spend; cash timing and repeat-purchase assumptions still matter.

We’d look at why customers return, how often they buy, and what remains after product costs. Test a relevant reorder reminder, a useful bundle, or a better post-purchase experience, then check actual repeat purchases and margin.

Our calculators use industry-standard formulas and are designed for directional accuracy. Results depend on the quality of your input data. For precise financial planning, we recommend validating results with your accountant or financial team.

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GLOSSARY

Learn these key metrics

Customer Lifetime ValueLTV

The total revenue a business expects to earn from a single customer over the ent...

Customer Retention RateCRR

The percentage of customers who remain active over a specific time period....

Customer Acquisition CostCAC

The total cost of acquiring a new paying customer, including all marketing and s...

Average Order ValueAOV

The average dollar amount customers spend per order/transaction....

Gross Margin

The percentage of revenue remaining after subtracting the cost of goods sold (CO...

Browse all glossary terms
Customer lifetime valueExample

2-year model · Gross profit

$300

Modeled value per customer

Purchases over 2 years6LTV to acquisition cost6.0×

$100 average order · 3 purchases/year · 50% gross margin · $50 acquisition cost. No retention or discount adjustment.

Illustrative example · Sample inputs, not your results.

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