Customer Lifetime Value (LTV) Calculator
Enter average annual revenue per customer, your gross margin, and average lifespan to estimate LTV.
How to use this calculator
- 1Enter the average revenue a customer brings per year.
- 2Enter your gross margin and how long a customer stays, on average.
- 3Read the margin-adjusted lifetime value of a customer.
How the Customer Lifetime Value (LTV) Calculator works
Lifetime value estimates the profit a customer generates across their whole relationship with you — average annual revenue, weighted by your gross margin, over how long they typically stay. Weighting by margin matters because revenue isn’t profit; LTV should reflect the money you actually keep.
LTV sets the ceiling on what you can afford to spend acquiring a customer. Compare it to your CAC: a healthy business earns several times more from a customer than it costs to win them. Raise LTV through retention, pricing and upsells.
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Create an invoice freeFrequently asked questions
How is LTV calculated?
Multiply average annual revenue per customer by your gross margin and by the average customer lifespan in years. It estimates the profit a customer generates over their life.
Why use gross margin?
Because revenue isn’t profit. Weighting by margin gives the value you actually keep, which is what you can afford to spend acquiring the customer (CAC).
How do I use LTV?
Compare it to your CAC. A healthy business earns several times more from a customer than it costs to acquire them — see the LTV:CAC calculator.
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