Ecommerce Customer Lifetime Value Calculator
Estimate customer lifetime value from average order value, purchase frequency, customer lifespan, and gross margin.
Lifetime value
Acquisition economics
Estimate customer value from repeat purchasing and gross profit, not revenue alone
Use this calculator when acquisition decisions depend on what a customer is expected to contribute across multiple orders rather than on the first order only.
Average order value and purchases per year estimate annual revenue per customer. Customer lifespan extends that revenue over the expected relationship.
Gross margin converts lifetime revenue into estimated gross-profit lifetime value. Optional CAC then shows the LTV:CAC relationship and the acquisition cost supported by a target ratio.
Customer lifespan and future purchase frequency are assumptions. Use observed cohort data when available, and avoid treating a long-term estimate as guaranteed future value.
How the calculation works
The calculator distinguishes lifetime revenue from lifetime gross profit so acquisition decisions are not based on revenue alone.
Estimate annual customer revenue
Average order value is multiplied by purchases per customer per year.
Estimate lifetime revenue
Annual customer revenue is multiplied by average customer lifespan.
Convert revenue into gross-profit LTV
Lifetime revenue is multiplied by gross margin.
Compare LTV with CAC
Optional acquisition cost is used to calculate LTV:CAC ratio and maximum CAC at a target ratio.
Example customer lifetime value calculation
Suppose an average customer spends $60 per order, orders three times per year, and remains active for two years:
Estimated lifetime revenue is $360.00 and estimated gross-profit LTV is $144.00. With $40 CAC, LTV:CAC is 3.6. At a target ratio of 3.0, maximum CAC would be $48.00.
What each result means
Revenue, gross-profit value, and acquisition cost are shown separately so the ratio is easier to interpret.
Lifetime revenue per customer
Estimated total revenue generated during the customer lifespan.
Estimated customer lifetime value
Lifetime revenue converted into gross profit using the entered gross margin.
LTV:CAC ratio
Estimated gross-profit LTV divided by customer acquisition cost.
Maximum CAC at target ratio
The highest CAC that would still maintain the target LTV:CAC ratio.
Customer lifetime value questions
Important assumptions to understand before using LTV for acquisition decisions.
Why use gross-profit LTV instead of revenue LTV?
Revenue is not fully available to fund acquisition because product and variable costs must still be paid. Gross-profit LTV is a more conservative economic measure.
How should I estimate customer lifespan?
Prefer observed retention or cohort data. If that is unavailable, use a cautious planning assumption and revisit it as real data accumulates.
Is a higher LTV:CAC ratio always better?
A higher ratio means more estimated lifetime gross profit per acquisition dollar, but very high ratios can also indicate underinvestment in growth. The appropriate target depends on business economics and cash flow.
Does this account for discounting future cash flows?
No. It is a simple planning model and does not discount future gross profit to present value.