Calculator Inputs
Example Data Table
| Scenario | AOV | Orders / Month | Margin | Refunds | Churn | CAC | Discounted LTV | LTV/CAC |
|---|---|---|---|---|---|---|---|---|
| Base Store | $85 | 1.8 | 62% | 4% | 5% | $140 | $460.74 | 3.29x |
| High Refund Risk | $85 | 1.8 | 62% | 12% | 5% | $140 | $412.13 | 2.94x |
| Better Retention | $85 | 2.0 | 64% | 3% | 3% | $140 | $631.28 | 4.51x |
Formula Used
- Net Order Value = Average Order Value × (1 − Refund Rate)
- Monthly Revenue = (Net Order Value × Orders per Month) + Expansion Revenue
- Monthly Gross Profit = Monthly Revenue × Gross Margin
- Monthly Contribution = Monthly Gross Profit − Support Cost per Month
- Churn-Implied Lifetime = 1 ÷ Monthly Churn Rate
- Effective Lifetime = Lower of Retention Horizon and Churn-Implied Lifetime
- Discounted LTV = Sum of Monthly Contribution ÷ (1 + Monthly Discount Rate)m
- LTV to CAC Ratio = Discounted LTV ÷ CAC
This version uses a present-value approach, so it is stricter than a simple revenue multiple and better for budgeting, paid acquisition planning, and payback analysis.
How to Use This Calculator
- Enter average order value and average monthly order frequency.
- Add gross margin to convert revenue into usable contribution.
- Include refund rate to reduce overstated customer value.
- Set a retention horizon and monthly churn percentage.
- Add service cost and expansion revenue for a fuller operating view.
- Enter discount rate and your blended customer acquisition cost.
- Choose your target LTV to CAC ratio, then submit.
- Review discounted LTV, ratio, payback, target CAC, and the chart.
Frequently Asked Questions
1. What is a healthy LTV to CAC ratio for ecommerce?
Many teams aim for at least 3.00x. Below 2.00x often signals weak efficiency, while much higher ratios may suggest room to scale acquisition faster.
2. Why use discounted LTV instead of simple lifetime revenue?
Discounted LTV recognizes that future profit is worth less today. It gives a tighter estimate for planning budgets, comparing channels, and setting realistic CAC limits.
3. Why does the calculator include refund rate?
Refunds reduce realized order value and can materially weaken unit economics. Ignoring them often causes LTV to look stronger than the business actually earns.
4. What does support cost per month represent?
It can include loyalty perks, service agents, retention tools, account management, or subscription servicing. These costs matter when measuring true contribution from each customer.
5. Why is effective lifetime capped by churn?
Churn provides a reality check. Even if a long retention window is entered, high monthly churn implies many customers will not stay that long.
6. What if my monthly contribution is negative?
Negative contribution means each customer destroys value before acquisition cost is even recovered. Improve pricing, margin, repeat purchase frequency, or servicing efficiency first.
7. Should CAC be channel-specific or blended?
Use blended CAC for a broad business view. Use channel-specific CAC when comparing campaigns, traffic sources, or creative tests with different economics.
8. Can I use this for subscription ecommerce?
Yes. The structure works well for subscriptions, replenishment models, and hybrid stores. Just enter realistic order frequency, churn, service cost, and expansion revenue.