How to Calculate Customer LTV

What is Customer LTV?

Customer Lifetime Value (LTV or CLV) is the total revenue a business can expect from a single customer throughout their entire relationship. It is one of the most important metrics in business — knowing your LTV helps determine how much you can profitably spend to acquire a customer (CAC).

Formula

Simple LTV = Average order value × Purchase frequency × Average customer lifespan

LTV: Simple LTV × Gross margin % — Simple LTV × Gross margin %

Step-by-Step Guide

1Simple LTV = Average order value × Purchase frequency × Average customer lifespan
2Gross profit LTV = Simple LTV × Gross margin %
3LTV:CAC ratio: healthy businesses target 3:1 or higher
4Average customer lifespan = 1 / churn rate

Worked Examples

Input

£75 avg order, 4 purchases/year, 3-year lifespan

Result

LTV = £900

£75 × 4 × 3 = £900

Input

Same but 40% gross margin

Result

Profit LTV = £360

£900 × 40% = £360

Frequently Asked Questions

What is Customer Ltv?

Customer Lifetime Value (LTV or CLV) is the total revenue a business can expect from a single customer throughout their entire relationship. It is one of the most important metrics in business — knowing your LTV helps determine how much you can profitably spend to acquire a customer (CAC)

How accurate is the Customer Ltv calculator?

The calculator uses the standard published formula for customer ltv. Results are accurate to the precision of the inputs you provide. For financial, medical, or legal decisions, always verify with a qualified professional.

What units does the Customer Ltv calculator use?

This calculator works with inches, percentages. You can enter values in the units shown — the calculator handles all conversions internally.

What formula does the Customer Ltv calculator use?

The core formula is: Simple LTV = Average order value × Purchase frequency × Average customer lifespan. Each step in the calculation is shown so you can verify the result manually.