LTV Calculator: Customer Lifetime Value

Customer Lifetime Value (LTV) estimates the gross profit a typical customer generates over their relationship with you. It is the anchor for acquisition targets: you can only afford CAC that leaves room under LTV.

How LTV is calculated

There are several models. A simple subscription version is:

LTV = ARPU × Gross Margin × Average Lifespan (periods)

Worked example: ARPU $50/month, margin 70%, average lifespan 24 months.

LTV = 50 × 0.70 × 24 = $840

Your average customer’s lifetime gross profit is $840. If your average CAC is $280, your LTV:CAC is 3.0×.

What to do with the result

• Target an LTV:CAC ≥ 3× for paid channels once you include overhead and payback time.
• Use LTV to set ROAS and CPC guardrails: higher LTV supports higher CAC.
• Improve LTV by raising retention, cross-sell and margin before you scale spend.
• See all free calculators on the Tools index.
• Related reads: ROAS Calculator, CTR Calculator, CPM Calculator.

Common mistakes and when not to trust LTV

• Revenue, not profit: Using revenue instead of gross margin overstates LTV and pushes CAC too high.
• Blended ARPU: Mixing free trials, heavy discounters and enterprise plans hides cohort differences.
• Assuming infinite life: Using 1/churn with noisy data can explode LTV; cap lifespan sensibly.
• Too little history: If you only have a few months of data, treat LTV as a forecast with wide error bars.
• Ignoring returns and cancellations: Especially in ecommerce and subscriptions, net down first.

Second example (churn sensitivity): With ARPU $50 and margin 70%: monthly churn 10% → expected lifespan ≈ 10 months, LTV ≈ $350. If churn improves to 5%, lifespan ≈ 20 months, LTV ≈ $700. Small churn changes double LTV — don’t lock CAC decisions on a single estimate.

Run your own numbers

Use the free Customer Lifetime Value (LTV) calculator to model subscription or repeat-purchase scenarios and see the LTV:CAC ratio.