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LIFETIME VALUE CALCULATOR

Lifetime Value Calculator — Customer LTV & LTV:CAC Ratio

Free customer lifetime value calculator for US businesses. Compute LTV, net LTV after CAC, the LTV:CAC ratio, and a year-by-year projection using Simple, Traditional, Discounted, or Cohort-based methods.

1. Customer Purchase Behavior

Average revenue per transaction.
Number of purchases per year, per customer.
Average number of years a customer stays active.
Fully loaded marketing + sales cost to win one customer.

2. Profitability & Retention

Percent of revenue left after variable costs.
Percent of customers retained each year.
Applied only for Discounted LTV.

3. Additional Options

Currency symbol only — values are not converted.

4. Reference & Notes

LIFETIME VALUE ANALYSIS

Customer LTV Projection

Reference: LTV-2026-001
Date:
Avg Order Value $100.00
Purchase Frequency 4/year
Customer Lifespan 3 Years
Lifetime Revenue $1,200.00
Annual Revenue / Customer $400.00
Lifetime Revenue / Customer $1,200.00
Gross Profit / Customer $480.00
Net LTV (After CAC) $430.00

LTV Breakdown

Annual Revenue $400.00
Lifetime Revenue $1,200.00
CAC $50.00
LTV:CAC Ratio 9.6:1
LTV:CAC Health ✅ Healthy (≥ 3:1) Your LTV:CAC ratio is above the widely used 3:1 threshold for sustainable growth.

LTV Projection

Year 1 $400
Year 2 $800
Year 3 $1,200
Total $1,200

LTV Formula

LTV = Average Order Value × Purchase Frequency × Customer Lifespan

$100.00 × 4 × 3 = $1,200.00

Your customer lifetime value is $1,200.00 gross. After acquisition costs, net LTV is $1,150.00.

Notes

Customer lifetime value analysis for business growth

This calculation is for informational and educational purposes. Actual LTV depends on pricing, product mix, retention variability, and market conditions. Consult a financial or business advisor for decisions specific to your company.
Prepared By
Date
GUIDE

How to Use This Lifetime Value Calculator

This free customer lifetime value calculator measures how much revenue and profit a single customer generates over the full relationship with your business. Enter average order value, purchase frequency, and lifespan to get lifetime revenue; add gross margin, retention rate, and customer acquisition cost to see gross LTV, net LTV, and the LTV:CAC ratio. Use it alongside our Customer Acquisition Cost Calculator and the SaaS Revenue Calculator to sanity-check pricing, marketing spend, and retention targets.

1

Enter Purchase Behavior

Average order value, purchase frequency per year, average customer lifespan, and customer acquisition cost.

2

Set Margin & Retention

Enter gross margin, annual retention rate, and (for Discounted LTV) a discount rate.

3

Choose Calculation Type

Simple (revenue), Traditional (margin), Retention-adjusted, or Discounted (present value).

4

Review Results

See LTV, net LTV after CAC, the LTV:CAC ratio, and the year-by-year projection.

5

Save, Print or Export

Save a draft, print the analysis, or download a PDF for your records.

LTV EDUCATION

What Does a Lifetime Value Calculator Calculate?

A lifetime value calculator — also called an LTV calculator or CLV calculator — converts a customer's purchase pattern into revenue and profit that the customer generates over the entire relationship. It then compares that value with the cost to acquire the customer to produce the LTV:CAC ratio, one of the most important metrics for growing a business sustainably.

Key LTV calculations

  • Annual Revenue per Customer: Average Order Value × Purchase Frequency.
  • Lifetime Revenue: Annual Revenue × Customer Lifespan (simple method).
  • Gross Profit per Customer: Lifetime Revenue × Gross Margin.
  • Retention-adjusted LTV: Lifetime revenue or profit weighted by annual retention.
  • Discounted LTV: Present value of retained profit using your discount rate.
  • Net LTV: LTV minus customer acquisition cost.
  • LTV:CAC Ratio: Gross LTV divided by CAC — the standard benchmark for sustainable growth.

Who can use this lifetime value calculator?

  • SaaS and Subscription Businesses: Model LTV by cohort and MRR retention.
  • E-commerce and DTC Brands: Size AOV, repeat purchase rate, and margin.
  • Marketplaces: Set take rates and buyer-side retention targets.
  • Agencies and Service Businesses: Evaluate retainer economics and churn.
  • Founders and Operators: Sanity-check CAC limits before scaling ad spend.
METHODOLOGY

Lifetime Value Calculator Methodology

MoneyTool supports four commonly used LTV definitions. Each is transparent about what it does and does not capture, so you can pick the one that matches the rigor of your decision.

1. Simple LTV (Revenue)

LTV = Average Order Value × Purchase Frequency × Customer Lifespan

Fastest estimate. Ignores margin and retention. Useful for top-of-funnel sizing.

2. Traditional LTV (Margin-adjusted)

LTV = Average Order Value × Purchase Frequency × Gross Margin × Customer Lifespan

Accounts for variable costs. Preferred when you know your gross margin and want profit-oriented LTV.

3. Retention-adjusted LTV

LTV = Σt=1..n [Annual Profit × Retentiont−1]

Weights each year by cumulative retention. Reflects that fewer customers remain each year.

4. Discounted LTV (Present value of cash flows)

LTV = Σt=1..n [Annual Profit × Retentiont−1] ÷ (1 + Discount Rate)t

The most rigorous method. Applies both retention and a discount rate so that future cash flows are valued in today's money — matching how CFOs and investors evaluate unit economics.

5. Net LTV and LTV:CAC ratio

Net LTV = LTV − CAC

LTV:CAC = Gross LTV ÷ CAC

The widely used SaaS benchmark is 3:1 — meaning each customer should generate three dollars of lifetime value per dollar of acquisition cost. Ratios below 1.5:1 usually indicate a business is spending too much to grow.

Important assumptions

  • Average order value, frequency, and margin are held constant across the lifespan.
  • Retention is modeled as a constant annual percentage, not year-by-year.
  • Currency display is a symbol change only; values are not FX-converted.
  • Taxes, refunds, chargebacks, and payment processing fees are not modeled.
  • This is a planning estimate, not a financial forecast or valuation.
  • Not a substitute for professional financial or accounting advice.
E-E-A-T & SOURCES

Lifetime Value Information, Sources & Editorial Review

MoneyTool separates calculation results from financial education and personalized business advice. The calculator uses documented unit-economics formulas, while external LTV guidance should be verified with authoritative sources.

Author and editorial responsibility

Methodology reviewed by the MoneyTool Finance Expert Team, a group of accountants, CPAs, and personal-finance analysts who maintain MoneyTool's calculator library and financial education content.

Last reviewed: | Unit-economics LTV methodology

Next review: When calculation logic, supported inputs, or relevant guidance changes.

Authoritative U.S. business and finance resources

  • U.S. Small Business Administration (SBA) — Business Guide: SBA Business Guide covers business planning, financing, and marketing for small US businesses.
  • U.S. Small Business Administration (SBA) — Loans: SBA Loan Programs covers SBA-backed financing options for working capital, equipment, and growth.
  • U.S. Securities and Exchange Commission (SEC) — Investor.gov: SEC Investor.gov provides investor education on unit economics, compounding, and business fundamentals.
  • Financial Industry Regulatory Authority (FINRA): FINRA Investor Education offers guidance on evaluating businesses and understanding financial metrics.
  • Internal Revenue Service (IRS) — Small Business Tax Center: IRS Small Business Tax Center covers deductions, cost of goods sold, and expense treatment that affect LTV inputs.
  • Federal Trade Commission (FTC) — Business Guidance: FTC Business Guidance covers advertising, disclosure, and pricing rules for business finance claims.
  • U.S. Bureau of Labor Statistics (BLS) — Small Business Data: BLS Business Employment Dynamics provides national data on business formation, survival, and growth.
  • Consumer Financial Protection Bureau (CFPB): CFPB Consumer Tools provides consumer-facing financial guidance that pairs with business education.

External resources are provided for education and verification. MoneyTool is not affiliated with or endorsed by the SBA, SEC, FINRA, IRS, FTC, BLS, or CFPB.

BEST PRACTICES

Tips for Customer LTV Analysis

A single LTV number rarely tells the full story. Combine LTV with CAC, retention, and margin to see the true unit economics of your business.

Track LTV Over Time

Monitor LTV by cohort and month to catch changing retention or pricing early.

Segment Customers

Calculate LTV by plan tier, channel, geography, or persona — averages hide the truth.

Aim for LTV:CAC ≥ 3:1

A 3:1 ratio is the widely used benchmark for sustainable, scalable customer acquisition.

Focus on Retention

Small retention improvements compound across the customer lifespan and raise LTV.

Review Quarterly

Update LTV every quarter with actual retention and margin data — not assumptions.

Consult a Professional

For pricing or fundraising decisions, validate LTV with a CFO or CPA before acting.

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FAQ

Frequently Asked Questions About Customer Lifetime Value

What is customer lifetime value (LTV)?

Customer lifetime value (LTV) is the total profit or revenue a business can expect from a single customer over the entire relationship. It is used to set marketing budgets, price products, and benchmark retention performance.

How is LTV calculated?

Simple LTV = Average Order Value × Purchase Frequency × Customer Lifespan. Margin-adjusted LTV multiplies that by gross margin. Discounted LTV further adjusts for retention and the present value of future cash flows.

What is the LTV:CAC ratio?

The LTV:CAC ratio compares customer lifetime value to customer acquisition cost. A ratio of 3:1 or higher is widely considered healthy for sustainable growth in SaaS, e-commerce, and subscription businesses.

What is the difference between gross LTV and net LTV?

Gross LTV measures revenue or profit before acquisition cost. Net LTV subtracts customer acquisition cost (CAC) from LTV to show the actual contribution per customer.

Why does retention matter for LTV?

Retention determines how many customers remain each year. Higher retention compounds across the customer lifespan, so small improvements can meaningfully increase LTV and the LTV:CAC ratio.

Is this lifetime value calculator free?

Yes. MoneyTool provides this customer lifetime value calculator free for educational and planning use.

Can I save my LTV analysis?

Yes. Save Draft stores the calculator inputs in your browser. Print Results and Download PDF can be used to keep a copy of the displayed analysis.

LEGAL

Lifetime Value Calculator Disclaimer

This lifetime value calculator provides estimates for informational and educational purposes. It does not constitute financial, legal, tax, accounting, or investment advice. Actual LTV depends on pricing, product mix, retention variability, market conditions, and other factors not modeled here.

  • Estimates only: Results depend on the inputs and assumptions described in the methodology.
  • Not a forecast: LTV is not a forward-looking financial statement or valuation.
  • Currency display: Changing the currency only changes the symbol — values are not FX-converted.
  • Verify with a professional: For pricing, fundraising, or acquisition decisions, validate LTV with a CFO, CPA, or advisor.
Last methodology review: . Calculator logic and educational content should be reviewed again whenever the methodology, supported inputs, or relevant external guidance changes.