LTV Calculator
Calculate customer lifetime value and retention revenue.
Enter order value, frequency, and lifespan.
Project total lifetime revenue per customer relationship.
A customer spending $60.00 4 times/year across 3 years delivers $720.00 in expected lifetime value.
Formulas & Logic
Transparent mathematical formulas behind this calculation engine.
Customer Lifetime Value ($)
LTV = Average Order Value × Purchase Frequency × Customer LifespanProjects total top-line revenue generated by an average customer account before churn.
Annual Customer Value ($)
Annual Value = Average Order Value × Purchase FrequencyThe expected yearly revenue generated per active customer.
Worked Example
Subscription Brand Lifetime Value ($60 AOV / 4x Frequency / 3 Yrs)
A direct-to-consumer brand records an average order value of $60.00, an average repurchase rate of 4 times per year, and an average retention lifespan of 3 years.
- Average Purchase Value
- $60.00
- Annual Frequency
- 4 purchases/yr
- Customer Lifespan
- 3 years
- Customer Lifetime Value
- $720.00
- Annual Value
- $240.00
- Total Transactions
- 12 orders
- Annual Customer Value = $60.00 × 4 = $240.00 per year
- Lifetime Purchases = 4 × 3 = 12 orders
- Customer Lifetime Value = $240.00 × 3 = $720.00
Takeaway: Each acquired customer generates an expected $720.00 in cumulative lifetime turnover.
Methodology & Assumptions
Underlying definitions and operational accounting principles.
- Revenue LTV
- Measures gross customer revenue turnover. To calculate gross margin LTV, multiply result by gross margin percentage.
- Constant Repurchase Cadence
- Assumes purchase frequency remains consistent across the customer lifespan.
Frequently Asked Questions
Practical answers regarding margins, markups, and pricing strategy.
How is LTV calculated?
Customer Lifetime Value (LTV) is estimated by multiplying average purchase value by annual purchase frequency and customer lifespan in years: LTV = Average Order Value × Purchase Frequency × Customer Lifespan. To calculate gross margin LTV, multiply the result by your gross profit margin percentage.
How do you calculate customer lifespan from churn rate?
Average customer lifespan equals 1 ÷ Annual Churn Rate. For example, a 25% annual churn rate implies an average lifespan of 1 ÷ 0.25 = 4 years.
Why is LTV important for customer acquisition?
LTV dictates the upper limit of how much capital you can afford to spend acquiring customers (CAC) while remaining profitable.
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