The LTV Calculator helps you calculate your customer lifetime value and compare it to industry benchmarks. Includes LTV:CAC ratio analysis and improvement tips.
What is the LTV Calculator?
This tool calculates how much revenue you can expect from a single customer over their entire relationship with your business. It also calculates your LTV:CAC ratio if you provide your customer acquisition cost.
How to Use the Tool
1. Access the Calculator
Visit /tools/ltv-calculator to open the calculator.
2. Enter Your Numbers
Fill in the required fields:
- Average Purchase Value: How much does a typical customer spend per transaction?
- Purchase Frequency (per year): How many times does a customer buy from you per year?
- Customer Lifespan (years): How long does a typical customer stay with you?
3. Add Optional Fields
For more accurate results, include:
- Gross Margin %: Your profit margin after cost of goods sold
- Customer Acquisition Cost (CAC): How much you spend to acquire one customer
4. Select Your Business Type
Choose from:
- SaaS/Subscription
- E-commerce
- Professional Services
- Agency
- Retail
- Other
5. Get Your Results
The calculator shows:
- Your customer lifetime value
- Annual customer value
- LTV:CAC ratio (if CAC provided)
- CAC payback period in months
- Grade (A-F) with health assessment
- Industry benchmark comparison
- Specific tips to improve your numbers
Understanding Your Results
Customer Lifetime Value (LTV)
The formula is:
LTV = Average Purchase Value × Purchase Frequency × Customer Lifespan
Example: If a customer spends $50 per order, orders 4 times a year, and stays for 3 years: $50 × 4 × 3 = $600 LTV
LTV:CAC Ratio
This compares your customer value to acquisition cost:
- 1:1 - Breaking even. No profit.
- 2:1 - Okay but leaves little margin.
- 3:1 - Standard target for healthy businesses.
- 5:1+ - Excellent (or under-investing in growth).
Your Grade
- A: Excellent LTV:CAC ratio (5:1 or better)
- B: Good ratio (3:1 to 5:1)
- C: Acceptable but needs improvement (2:1 to 3:1)
- D: Poor ratio (1.5:1 to 2:1)
- F: Unsustainable (below 1.5:1)
Key Features
Industry Benchmarks
Compare your LTV:CAC ratio to typical, good, and great benchmarks for your business type:
- SaaS/Subscription: 3:1 typical, 5:1 good, 7:1+ great
- E-commerce: 2:1 typical, 3:1 good, 5:1+ great
- Professional Services: 3:1 typical, 5:1 good, 8:1+ great
- Agency: 2.5:1 typical, 4:1 good, 6:1+ great
- Retail: 2:1 typical, 3:1 good, 4:1+ great
Personalized Improvement Tips
Based on your results, the tool provides specific recommendations to:
- Increase average purchase value
- Increase purchase frequency
- Increase customer lifespan (retention)
- Reduce customer acquisition cost
Formula Breakdown
See exactly how your LTV is calculated with a clear formula breakdown showing your inputs and result.
Best Practices
Use Real Data
Don't guess. Pull actual numbers from your accounting or CRM. Average them over the last 6-12 months for accuracy.
Include Gross Margin
If you have significant costs of goods sold, include your gross margin percentage. This gives you a more realistic LTV.
Calculate CAC Properly
Add up everything you spend on sales and marketing (ads, salaries, tools, content) and divide by new customers acquired in that period.
Track Trends Over Time
Calculate your LTV quarterly. Look at trends rather than obsessing over any single number. Is it improving or declining?
How to Improve Your LTV
Three Levers to Pull
- Increase average purchase value: Upsells, bundles, premium tiers
- Increase purchase frequency: Subscriptions, loyalty programs, regular touchpoints
- Increase customer lifespan: Better retention, faster support, proactive communication
Focus on Retention
Of the three levers, retention usually has the biggest impact. A customer who stays 4 years instead of 2 doubles their LTV without any acquisition cost.
What Kills Retention?
- Slow support responses
- Ignored emails and requests
- Feeling like a number instead of a customer
- Poor onboarding experience
Common Questions
What's a good LTV?
It depends on your CAC. The number that matters is your LTV:CAC ratio. Aim for at least 3:1.
How do I calculate LTV for subscriptions?
For SaaS: LTV = Average Monthly Revenue per Customer × Average Customer Lifespan (in months). Or: LTV = Monthly Revenue ÷ Monthly Churn Rate.
What's the difference between LTV and CLV?
Nothing. LTV (Lifetime Value) and CLV (Customer Lifetime Value) mean the same thing.
How often should I calculate LTV?
Quarterly is good for most businesses. Monthly if you're making big changes to pricing, product, or acquisition channels.
Related Tools
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