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LTV Calculator
Calculate Customer Lifetime Value (LTV) for subscription, e-commerce, and service businesses. Find gross margin LTV, compare to your CAC, and understand what each new customer is truly worth to your business.
Customer Lifetime Value (LTV) is the total revenue a customer generates throughout their relationship with your business. Knowing LTV helps you determine how much you can afford to spend on customer acquisition, which customer segments are most valuable, and where to focus retention efforts.
LTV calculation varies by business model. Subscription businesses use monthly recurring revenue and churn rate. E-commerce uses average order value and purchase frequency. Service businesses use average project value and repeat business rate. Understanding your specific model determines which formula applies.
Business Type
Formula
Example
SaaS/Subscription
ARPU / Monthly Churn Rate
$50/mo, 2% churn: LTV=$2,500
E-commerce
AOV × Frequency × Lifespan
$80 × 4×/yr × 3 yrs = $960
Service Business
Avg Project Value × # Projects
$2,000 × 4 projects = $8,000
Retail
Avg Transaction × Visits/yr × Years
$45 × 12 × 5 = $2,700
Mobile App
ARPU × Months Active
$3/mo × 18 months = $54
Improving Customer Lifetime Value
LTV can be increased through: retention improvement (even 5% better retention can increase LTV by 25-95%, per Bain & Company research), upselling and cross-selling (increase ARPU), onboarding optimization (customers who experience value quickly have lower churn), loyalty programs (increase purchase frequency), and pricing strategy (annual plans vs monthly reduce churn and increase LTV).
LTV Cohort Analysis
Different customer acquisition channels and time periods often produce different LTV profiles. Organic search customers tend to have 30-50% higher LTV than paid acquisition. Referred customers: 16-25% higher LTV. First-month churn is often 3-5× higher than steady-state churn. Always analyze LTV by acquisition cohort to understand which channels produce the most valuable customers, not just the most customers.
Frequently Asked Questions
For subscriptions: LTV = Monthly Revenue per Customer / Monthly Churn Rate. For e-commerce: LTV = Average Order Value × Purchase Frequency × Customer Lifespan. Example e-commerce: $75 average order, 3 purchases/year, customers active 2 years: LTV = $75 × 3 × 2 = $450. Multiply by gross margin for gross LTV.
LTV benchmarks depend heavily on industry and business model. The key metric is LTV:CAC ratio — LTV should be at least 3× your CAC. B2B SaaS: LTV $2,000-20,000+. E-commerce: $100-500. Consumer apps: $10-100. Financial services: $500-5,000. Rather than comparing absolute LTV across industries, focus on your LTV:CAC ratio and trend over time.
Dramatically. SaaS with $100 ARPU: at 1% monthly churn: LTV = $100/0.01 = $10,000. At 2% churn: LTV = $5,000. At 5% churn: LTV = $2,000. Halving your churn rate doubles LTV — often more impactful than doubling revenue. Retention is typically 5-7× cheaper than acquisition and has compounding benefits on LTV.
Gross Margin LTV = LTV × Gross Margin %. This represents the actual profit contribution, not just revenue. A $1,000 LTV at 30% gross margin contributes only $300 toward covering CAC and operating expenses. At 80% gross margin, $800 goes toward overhead and profit. Gross Margin LTV is what should be compared to CAC, not simple revenue LTV.
Five proven strategies: 1) Improve onboarding — customers who use your product successfully in week 1 have 3-5× lower churn. 2) Upsell to higher tiers — target customers getting value at current tier. 3) Cross-sell complementary products — increases spending per customer. 4) Build switching costs — integrations, data, and workflow dependencies reduce churn. 5) Annual billing — typically reduces monthly churn by 20-40%.
LTV (Lifetime Value) and CLV (Customer Lifetime Value) are used interchangeably in most business contexts. Some distinguish: CLV considers the net present value of future cash flows (discounting future money), while LTV may refer to simple undiscounted revenue sum. For most business decisions, the simple LTV calculation is sufficient. CLV with discounting is used in financial modeling and investor presentations.