Customer Lifetime Value Calculator

Method and assumptions

A simple LTV model is most useful when its assumptions are explicit. Use observed purchase frequency and lifespan from a mature cohort rather than a short launch period.

Worked scenario

Use a mature customer cohort to estimate average order value, purchase frequency, gross margin, expected active lifespan and annual service cost. Calculate revenue LTV and gross-profit or net-contribution LTV separately. Test a conservative lifespan because small changes can dominate a simple model.

How to interpret the result

LTV is a forecast, not an observed fact, until the cohort matures. Use retention or repeat-purchase behavior that matches the business model and avoid extrapolating a short launch period indefinitely. Discounting and contribution timing matter when payback is long or cash is constrained.

Input reference

Currency

Example default: USD

Average order value

Example default: 70

Purchases per customer per year

Example default: 2.5

Expected customer lifespan in years

Example default: 3

Gross margin

Example default: 45%

Annual service and retention cost

Example default: 15

Customer acquisition cost

Example default: 50

Common mistakes

• Using revenue LTV as if it were profit available for acquisition.
• Projecting a brief high-frequency period across the full lifespan.
• Ignoring service, returns and retention cost.

Before using the result

1. Use cohort data with enough time to observe repeat behavior.
2. Report revenue, gross-profit and net LTV separately.
3. Pair LTV with CAC payback and cash requirements.

Questions to check before deciding