Customer Lifetime Value Calculator (CLV and LTV:CAC)
By Santaji GadepatilinUpdated October 27, 2026
Customer lifetime value estimates the total profit a customer brings over their relationship with a business. Comparing it with acquisition cost shows whether marketing pays off.
How to use the customer lifetime value calculator
Enter the average order value, purchases per year, gross margin, annual churn rate and your customer acquisition cost. You get the average customer lifespan, lifetime value (in gross profit), the LTV:CAC ratio and the CAC payback period.
Customer lifetime value formulas
Lifespan = 1 ÷ churn · CLV = AOV × frequency × margin × lifespan
LTV:CAC = CLV ÷ CAC · Payback = CAC ÷ yearly gross profit per customer
Example
AOV 60, 4 orders a year, 40% margin, 30% churn, CAC 80:
- Yearly gross profit per customer = 60 × 4 × 0.4 = 96
- Lifespan = 1 ÷ 0.3 = 3.33 years
- CLV = 96 × 3.33 = 320
- LTV:CAC = 320 ÷ 80 = 4.0 : 1
- Payback = 80 ÷ 96 × 12 = 10 months
How churn changes CLV
| Annual churn | Lifespan | CLV (96 profit a year) |
|---|---|---|
| 10% | 10.0 years | 960 |
| 20% | 5.0 years | 480 |
| 30% | 3.3 years | 320 |
| 40% | 2.5 years | 240 |
| 50% | 2.0 years | 192 |
| 70% | 1.4 years | 137 |
Cutting churn is often the fastest way to raise lifetime value.
Subscription businesses
For subscriptions, use monthly figures: monthly revenue per user × margin ÷ monthly churn. A 20 monthly plan at 80% margin with 4% monthly churn has a CLV of 20 × 0.8 ÷ 0.04 = 400.
Improving LTV:CAC
- Raise CLV: upsells, loyalty programmes, better onboarding, lower churn.
- Lower CAC: improve conversion rates, focus on efficient channels, referrals.
- Track CAC by channel with the ad metrics calculator.
Frequently asked questions
What is a good LTV to CAC ratio?
A ratio of about 3:1 is a widely used benchmark. Below 1:1 you lose money on each customer; far above 5:1 may mean you are under-investing in growth.
How is customer lifetime value calculated?
CLV = average order value × purchases per year × gross margin × customer lifespan in years. Lifespan can be estimated as 1 ÷ annual churn rate.
Should CLV use revenue or profit?
Profit (gross margin) is better for comparing with acquisition cost. Revenue-based LTV overstates what you can afford to spend.
What is CAC payback?
How long it takes for gross profit from a customer to repay the cost of acquiring them. Under 12 months is generally considered healthy.