Calculate how much revenue a customer generates over their entire relationship with your business.
LTV (Lifetime Value) is the total revenue a customer generates over their entire relationship with your business, adjusted for profit margin.
Why it matters: LTV determines how much you can profitably spend to acquire a customer. A higher LTV means you can outbid competitors on ads and still stay profitable.
LTV projections assume historical patterns continue. Actual lifetime value varies by acquisition channel, cohort, and market conditions.
Customer lifetime value represents the total revenue a customer generates across their entire relationship with your business. It's the single most important metric for determining sustainable growth.
LTV tells you the maximum you can spend to acquire a customer while remaining profitable. If LTV is $500, you can afford a $100 CPA and still generate 5x return on your acquisition investment.
Companies that understand LTV make better advertising decisions. They can outbid competitors on ad platforms because they know the long-term value justifies higher upfront costs.
Simple LTV = Average Order Value × Purchase Frequency × Customer Lifespan. Example: $50 AOV × 4 purchases/year × 3 years = $600 LTV.
For more accuracy, multiply by gross margin to get profit-based LTV. $600 revenue LTV × 40% margin = $240 profit LTV. This is what you can actually afford to spend on acquisition.
Advanced LTV models account for churn rate, discount rate (time value of money), and cohort-specific behavior. Start with the simple formula and add complexity as your data matures.
LTV:CAC ratio compares customer lifetime value to customer acquisition cost. It's the ultimate measure of marketing efficiency and business sustainability.
Below 1:1 — you lose money on every customer. 1:1 to 3:1 — you're profitable but may be under-investing. 3:1 — healthy benchmark. Above 5:1 — consider investing more in growth.
Track LTV:CAC by acquisition channel. Organic might be 10:1 (low cost), while paid might be 2:1. This helps you allocate budget to channels that balance volume with efficiency.
Maria Santos
Mar 5, 2026
LTV Calculator helped me convince my client to accept higher CPAs on acquisition campaigns. When you show the lifetime value math, the investment makes sense.
Customer lifetime value (LTV/CLV) is the total revenue a customer generates during their entire relationship with your business. It helps determine how much you can afford to spend acquiring each customer.
A 3:1 LTV:CAC ratio is the standard benchmark. Below 1:1 means you lose money on every customer. 3:1 means healthy profitability. Above 5:1 might mean you're under-investing in growth.
Roughly 80% of your revenue often comes from 20% of your customers. Segment your LTV analysis to identify high-value customer profiles and focus acquisition efforts on attracting similar audiences.
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