Revenue LTV = average order value × orders per year × customer lifespan in yearsHow to use this calculator
- Use average order value and annual purchase frequency from a consistent customer population.
- Enter an estimated customer lifespan in years and a gross margin supported by your own data.
- Add CAC to compare gross-profit LTV with acquisition cost and review the lifespan scenarios.
Worked example
An illustrative customer spends $50 per order, places three orders a year and remains active for two years. Revenue LTV is $300. At a 60% gross margin, margin-adjusted LTV is $180. With $50 CAC, the gross-profit LTV:CAC ratio is 3.6:1 and gross profit less acquisition cost is $130, before other operating expenses.
Revenue LTV versus margin-adjusted LTV
A revenue estimate describes sales, not what remains after fulfilling them. This tool shows lifetime revenue and separately applies your gross margin. The headline figure is gross-profit LTV before acquisition costs. Its LTV:CAC ratio uses that same gross-profit basis, so the numerator is explicit.
Keep frequency, lifespan and cohorts consistent
This form uses orders per year and lifespan in years. Fractional annual order frequency is allowed. Do not mix one cohort’s order value with another cohort’s retention, or use the age of a young business as a mature customer lifespan. The form accepts assumptions; it does not estimate them from a store connection.
Test assumptions without treating them as forecasts
The three sensitivity cards vary only the lifespan to half, the entered value and one-and-a-half times the entered value. They are scenarios, not lower and upper statistical bounds. The model keeps order value, frequency and margin constant, and does not discount future cash flows or infer a retention curve.
Reference: Shopify: revenue and margin-adjusted customer lifetime value.
Common questions
Are CLV and LTV the same thing?
In customer analytics these abbreviations commonly refer to customer lifetime value, but teams can use different revenue or profit definitions. This page labels both bases explicitly. LTV here does not mean the loan-to-value ratio used in lending.
Does gross profit less CAC equal net profit?
No. It subtracts acquisition cost once from the gross-profit estimate. Other operating expenses, taxes and financing can remain, and cash may arrive much later than the acquisition spend. The tool does not infer a payback date from annual averages.
What is a good LTV:CAC ratio?
There is no universal target established by this calculation. Margin definitions, retention, capital requirements and cash timing matter. Compare a consistently defined numerator and CAC across comparable customer groups instead of applying a benchmark without context.
Can I use this for a subscription business?
Only if its order value, annual purchase frequency and lifespan assumptions appropriately describe your question. This is not a monthly-churn model and does not calculate lifespan as one divided by churn. A subscription retention analysis can require a different model.