A constant-churn gross-contribution approximation—not a cohort forecast or an ad-bid recommendation.
Calculation details
Planning estimate only. Platform fees, taxes, payment costs, and policies can change; verify current terms before pricing.
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Use this result
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What does this calculator estimate?
A customer lifetime value calculator estimates what a customer is worth over their relationship with you. Enter order value, frequency, margin, and churn to see LTV and a max acquisition budget.
- LTV = annual contribution × 1/churn
- Annual contribution = AOV × frequency × margin
- Healthy LTV:CAC is 3:1 or higher
Why LTV matters
Customer lifetime value answers the core growth question: how much can you spend to acquire a customer? If LTV is $400 and you pay $100 to acquire (a 4:1 ratio), the model works. Businesses that ignore LTV over-spend on acquisition or under-invest in retention.
Limitations to watch for
Churn is rarely constant — it changes with cohort and product stage. LTV ignores referral value and cross-sell expansion. The estimate uses gross margin, not net, and assumes stable order frequency.
How to use it in practice
Track average order value, purchase frequency, margin, and annual churn from real data. Compute LTV, then set your target LTV:CAC (3:1 is a common healthy floor). Use it to justify retention spending and cap acquisition bids.
- Enter AOV, purchases per year, and gross margin.
- Enter the annual churn rate.
- Read LTV and the maximum acquisition cost at your target ratio.
How this calculator works
Formula
Annual gross contribution = average order value × purchases per year × gross margin %. Customer lifetime = 1 ÷ annual churn rate. LTV = annual contribution × lifetime. Max acquisition cost = LTV ÷ target LTV:CAC ratio.
Worked example
$50 order value, 4 purchases/year, 40% margin, 20% annual churn: annual contribution = $80, lifetime = 5 years, LTV = $400.
Assumptions to verify
- Order value, frequency, and margin are stable.
- Churn is constant over the customer's life.
- No referral or expansion revenue is modeled.
Frequently asked questions
What is customer lifetime value?
The total profit a customer generates over their entire relationship with you — annual contribution × expected lifetime.
How do I calculate LTV?
Annual contribution = AOV × purchases × margin; lifetime = 1 ÷ churn; LTV = annual × lifetime. $80 × 5 = $400.
What is churn?
The annual rate at which customers stop buying — 20% churn means the average customer stays 5 years (1 ÷ 0.2).
What is a good LTV:CAC ratio?
3:1 or higher is a common healthy benchmark — you earn $3 for every $1 spent acquiring.
How much should I spend to acquire a customer?
At a 3:1 target with $400 LTV, up to $133 on acquisition (the tool computes this from your target ratio).
How do I improve LTV?
Increase order value (upsells), frequency (retention programs), or margin; reduce churn.
Does LTV include referrals?
No — the basic model counts the customer's own purchases. Referral value is a bonus on top.
Cite this tool
BoringToolsKit. “Customer Lifetime Value Calculator.” boringtoolskit.com/customer-lifetime-value-calculator/ (reviewed 2026-08-25). Free to reference in articles, syllabi, and answer posts with a link.
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