Customer Lifetime Value Calculator

The customer lifetime value formula

Lifespan is often estimated as 1 ÷ annual churn rate. If a third of customers stop buying each year, expected lifespan is about three years. For subscription and replenishment brands, frequency and churn usually matter most. For products people buy once, average order value and first-order margin matter more.

To check what you can afford to pay for that customer in ads, use the ROAS calculator. Repeat orders mostly come from email and SMS.

Customer lifetime value FAQs

What is customer lifetime value?

Customer lifetime value (CLV, often called LTV) is the gross profit you expect from a customer over the whole relationship, not just the first order. For an online store it comes from average order value, how often customers buy, how long they keep buying and your margin. Brands use it to set how much they can spend to win a customer and how hard to invest in retention.

How do you calculate customer lifetime value?

A practical ecommerce formula is CLV = average order value × orders per year × customer lifespan in years × gross margin. For example, $85 × 2.4 orders a year × 3 years × 50% margin = $306. Cohort and predictive models are more precise, but this average-based method runs on numbers most stores can pull from Shopify reports.

What is a good LTV to CAC ratio?

A common rule of thumb is 3:1, meaning a customer brings in three times their acquisition cost in gross profit. Below 1:1 you lose money on every customer you buy. A very high ratio can mean you are spending too little on growth. Compare like with like: if lifetime value is gross profit, acquisition cost should include all the marketing it took to win the customer.

How do you work out customer lifespan from churn?

If you know what share of customers stop buying each year, lifespan is roughly 1 ÷ annual churn rate. With 25% churn a customer lasts about 4 years; with 50% churn, about 2 years. Use the same definition of an active customer you use for purchase frequency.

How do you increase customer lifetime value?

Raise average order value with bundles and free-shipping thresholds, increase how often customers buy with email, SMS, replenishment and loyalty, keep them buying for longer by fixing what makes them leave, or improve margin. Because the inputs multiply, a modest lift in two of them often beats a big push on one.

What is the difference between CLV and LTV?

In practice they mean the same thing. CLV (customer lifetime value) and LTV (lifetime value) are used interchangeably, and LTV is the usual short form in LTV:CAC. This calculator gives the same number under either name: the gross profit a customer is expected to bring in over their active lifespan.

Is this customer lifetime value calculator free?

Yes. It is free, runs in your browser and does not store your inputs. Use it to set acquisition budgets and retention priorities, and move to cohort analysis when you need predictive lifetime value.