Customer Lifetime Value (LTV) Calculator

Customer lifetime value (LTV, sometimes CLV) is the total profit you can expect from a customer across their entire relationship with you. Enter your average revenue per customer, your gross margin and your monthly churn rate, and this free calculator estimates each customer’s lifetime value, how long they stay, and — if you add your acquisition cost — the LTV:CAC ratio that tells you whether your growth is healthy.

What is customer lifetime value?

Customer lifetime value is the total profit a customer generates over the whole time they stay with your business — not just their first purchase. It reframes a customer from a one-off transaction into a long-term asset, which changes almost every decision about how much you can spend to acquire and keep them.

LTV is the number that justifies marketing budgets, sets the ceiling on acquisition cost, and reveals whether a business compounds or leaks. A company with high LTV can afford to outspend competitors to win customers, because it knows each one pays back many times over.

The LTV formula

This calculator uses the standard margin-and-churn model:

Average lifespan (months) = 100 ÷ monthly churn rate (%)

LTV = monthly revenue × gross margin × average lifespan

The logic: if 5% of customers leave each month, the average customer stays 1 ÷ 0.05 = 20 months. Over those months they generate revenue, of which you keep the gross-margin share. Multiply the three together and you have the lifetime profit per customer. Using margin rather than raw revenue is important — LTV should reflect money you actually keep, not top-line sales.

A worked example

A subscription business charges $80/month, runs an 80% gross margin, and loses 5% of customers each month. Acquiring a customer costs $200.

• Average lifespan: 100 ÷ 5 = 20 months
• LTV: $80 × 80% × 20 = $1,280
• LTV:CAC: $1,280 ÷ $200 = 6.4:1

A 6.4:1 ratio is strong — each customer returns more than six times what it costs to acquire them, leaving plenty of room to invest in growth.

Why churn dominates LTV

Churn is the most powerful input by far, because it sets the lifespan that multiplies everything else. Halving churn doubles the average lifespan, which doubles LTV — a far bigger effect than a comparable change to price or margin. Dropping monthly churn from 5% to 2.5% in the example above stretches lifespan from 20 to 40 months and lifts LTV from $1,280 to $2,560. This is why retention is often the highest-return work a business can do: small improvements in keeping customers compound into large gains in their lifetime value.

LTV:CAC — the health ratio of growth

LTV only means something next to what it costs to acquire a customer. The LTV:CAC ratio divides lifetime value by acquisition cost, and the widely used benchmark is 3:1 or higher — each customer should be worth at least three times what they cost to win. Below 1:1 you lose money on every customer and the model is broken. But a very high ratio (8:1 or more) is not automatically good news: it often means you are under-investing in acquisition and could profitably spend more to grow faster. The ratio is a steering wheel, not just a scorecard.

How to increase customer lifetime value

There are four reliable levers. Reduce churn — the highest-leverage move, since it lengthens every customer’s lifespan. Raise revenue per customer through upsells, cross-sells and price increases. Improve gross margin by lowering the cost to serve each customer. And shorten time-to-value so customers reach their "aha" moment before they have a chance to leave. Fast, responsive support and proactive onboarding move several of these at once — which is exactly where always-on AI agents help, by giving every customer instant answers and follow-up that would be uneconomical to staff by hand.

Limitations to keep in mind

This model assumes a roughly constant churn rate and stable revenue, which works well for subscription and repeat-purchase businesses but less so where buying is sporadic or one-off. It also uses gross margin, not fully-loaded profit, so it overstates the truly net value if your cost-to-serve is high. Treat the result as a well-grounded estimate for decision-making — comparing segments, setting CAC ceilings, justifying retention spend — rather than an exact accounting figure. For most growth decisions, a good LTV estimate beats no estimate by a wide margin.

When to use an LTV calculator

Use it before setting a marketing budget, evaluating a new channel, or deciding how much to invest in retention and support. LTV tells you the most you can afford to pay for a customer and still profit, which turns acquisition from guesswork into arithmetic. It is also invaluable for comparing customer segments — discovering that one type of customer is worth three times another often reshapes targeting, pricing and product priorities entirely.

Frequently asked questions