Customer lifetime value calculator
Enter what a customer spends per order, how often they buy and for how long. Add your margin to see their lifetime value in profit, the number to compare with CAC.
Formula
LTV = average order value × orders per year × years retained
Multiply by gross margin to get lifetime gross profit, which is what you can spend to win a customer. Use your own order history for each input rather than guesses.
New to the term? Read what LTV means in the glossary.
How to calculate customer lifetime value: a worked example
A pet food store's customers spend $50 per order, buy 2.5 times a year and keep buying for 2 years. Its gross margin is 60%.
- Lifetime revenue = $50 × 2.5 × 2 = $250
- Lifetime gross profit = $250 × 60% = $150
A customer is worth $150 in gross profit, so the store breaks even if it spends up to $150 to win one.
What is a good LTV?
LTV is good when it's comfortably above what it costs to win a customer. Divide lifetime gross profit by your CAC: above 1, each customer pays back; below 1, growth loses money.
Timing matters too. A customer who pays back in their first order funds the next one; one who pays back in year two has to be financed until then. Check the ratio with the LTV to CAC calculator.
Questions about customer lifetime value
- Should LTV use revenue or profit?
- Profit, when you compare it with acquisition cost. Revenue LTV overstates what a customer is worth, because product cost, shipping and fees come out of every order. Gross profit LTV is the honest ceiling on CAC.
- How do I estimate how long customers stay?
- Use your order history: find the share of customers who order again in each period. One divided by the yearly churn rate gives an average lifespan. New stores should use a short window, such as 12 months, until they have data.
- How do I increase LTV?
- Get the second order. A follow-up email with a reason to come back, a refill or subscription option, and products that pair with the first purchase all raise orders per customer without new acquisition spend.
Do it with Replo
See lifetime value from real orders
Replo reads your Shopify orders and works out LTV by first product, channel or month.
Prompt: “what's my 12-month customer LTV by first product?”