Customer Lifetime Value Calculator
Use the inputs below to estimate revenue value, profit value, discounted value, and CAC efficiency for one average customer.
Example Data Table
These sample cases help marketers compare lean, steady, and premium customer segments.
| Segment | Order Value | Purchases/Year | Lifespan | Margin % | Retention % | CAC |
|---|---|---|---|---|---|---|
| Starter Buyers | $55 | 5 | 3 years | 48% | 62% | $70 |
| Core Subscribers | $120 | 8 | 5 years | 62% | 78% | $250 |
| Premium Accounts | $260 | 10 | 6 years | 69% | 85% | $520 |
Formula Used
1. Annual Revenue
Annual Revenue = (Average Order Value × Purchases Per Year) + Annual Upsell Revenue
2. Simple Revenue LTV
Simple Revenue LTV = Annual Revenue × Customer Lifespan
3. Annual Gross Profit
Annual Gross Profit = (Annual Revenue × Gross Margin) − Annual Service Cost
4. Gross Profit LTV
Gross Profit LTV = Annual Gross Profit × Customer Lifespan
5. Discounted Year Contribution
Discounted Contribution for Year t = [Expected Gross Profit × Retention(t−1)] ÷ (1 + Discount Rate)t
6. Discounted LTV
Discounted LTV = Sum of all yearly discounted contributions
7. Net LTV After CAC
Net LTV After CAC = Discounted LTV − Customer Acquisition Cost
8. LTV to CAC Ratio
LTV:CAC Ratio = Discounted LTV ÷ Customer Acquisition Cost
How to Use This Calculator
- Enter a currency symbol for readable outputs.
- Add the average order value from your sales data.
- Enter how many times one customer buys yearly.
- Set the expected customer lifespan in years.
- Input gross margin, retention rate, and discount rate.
- Add annual service cost and acquisition cost.
- Include yearly upsell revenue if it matters.
- Press the button to view results above the form.
- Use the chart to inspect yearly value build-up.
- Download CSV or PDF for reporting and sharing.
Frequently Asked Questions
1. What is customer lifetime value?
Customer lifetime value estimates the total financial value one customer brings during the relationship. Marketers use it to judge acquisition efficiency, retention performance, and long-term budget decisions.
2. Why does this calculator use gross margin?
Revenue alone can overstate value. Gross margin removes product delivery cost and gives a profit-focused view. That makes comparisons between channels and customer groups more useful.
3. Why is retention rate important?
Retention controls how many customers remain active across future years. Higher retention increases expected revenue, raises discounted value, and usually improves the efficiency of acquisition spend.
4. What does discount rate mean here?
Discount rate reduces future profits to present-day value. It reflects uncertainty, capital cost, and time value. This creates a more realistic planning figure than raw future totals.
5. Should I include CAC in lifetime value?
It is helpful to view both figures. Discounted LTV shows total value generated. Net LTV after CAC shows how much value remains after winning that customer.
6. What is a healthy LTV to CAC ratio?
Many teams aim for ratios above 3:1, but targets vary by industry, payback tolerance, and cash position. Lower ratios can still work when retention improves later.
7. Can I use this calculator for subscription businesses?
Yes. It works well for subscription, ecommerce, service, and membership models. Just enter realistic yearly purchase, retention, margin, and service cost estimates.
8. Which output should guide marketing decisions most?
Discounted LTV and net LTV after CAC are usually the most useful. They connect revenue quality, churn, time value, and acquisition cost in one planning view.