What is Customer Lifetime Value?

Customer Lifetime Value, or LTV, estimates the gross profit a business may earn from one customer over the expected relationship period.

What is a good LTV to CAC ratio?

A common benchmark is around 3:1, meaning the customer lifetime value is roughly three times the customer acquisition cost. The right benchmark depends on industry, cash flow, margin, and growth stage.

Does LTV include gross margin?

For business decisions, LTV should usually be calculated using gross profit rather than revenue, because fulfillment, product, and service costs affect the economic value of a customer.

Is LTV enough to decide marketing spend?

No. LTV should be reviewed with CAC, payback period, churn, contribution margin, cash flow, and customer quality before increasing marketing spend.

Customer profitability tool

LTV Calculator for Customer Lifetime Value

Estimate how much a customer is worth over time, compare it with acquisition cost, evaluate payback, and decide whether your ecommerce, subscription, or recurring revenue model can scale profitably.

Input assumptions

Guide: Use gross margin and realistic churn assumptions. LTV based only on revenue may overstate customer value, especially in ecommerce and subscription businesses with high fulfillment or service costs.

Currency

Business model

Business / project name

Current active customers

Average order / monthly subscription value For subscriptions, enter the monthly subscription fee.

Purchases per customer per month Use 1 for a single monthly subscription.

Gross margin %

Monthly churn rate % If churn is 0, the manual lifetime below is used.

Manual lifetime if churn is unknown (months)

Analysis horizon (months)

Customer acquisition cost (CAC)

Target LTV:CAC ratio

Annual discount rate %

Expected retention improvement % Used in improvement scenarios.

Result and decision signal

Discounted customer lifetime value

Enter assumptions and calculate

0Quality score

LTV:CAC Ratio

0.00x

Target is usually 3.00x+

CAC Payback

0.0 months

Shorter improves cash flow

Expected Lifetime

0.0 months

Based on churn or manual input

Monthly Gross Profit / Customer

Revenue after gross margin

Simple LTV

Before discounting

Maximum Healthy CAC

Based on target ratio

Calculate the tool to see alerts.

Calculate the tool to see the improvement plan.

Scenario	Discounted LTV	LTV:CAC	Churn	Decision signal
Calculate the tool to see scenarios.

Metric	Value	Interpretation
Calculate the tool to see metrics.

What is an LTV Calculator?

An LTV Calculator estimates the economic value of a customer over the expected relationship period. It is especially useful for ecommerce, SaaS, subscription businesses, marketplaces, and any model that invests money to acquire customers and expects repeat purchases or recurring revenue.

How to use this tool

Enter average order value or monthly subscription price.
Add purchase frequency, gross margin, churn, CAC, and discount rate.
Calculate LTV and compare it with customer acquisition cost.
Review alerts, scenarios, and the improvement plan.
Save the result as PDF or export CSV for analysis.

Practical example

If a customer spends $45 per order, buys 1.4 times per month, and the business earns 52% gross margin, the monthly gross profit per customer is estimated first. The tool then uses churn, discount rate, and CAC to estimate LTV, LTV:CAC, payback, and the quality of the acquisition economics.

When should you use it?

Use this tool before increasing ad spend, launching a subscription plan, comparing customer segments, pricing retention campaigns, or deciding whether your acquisition cost is financially sustainable.

Related tools

Use these Smart Fin Reports tools with LTV to build a stronger customer profitability and growth analysis:

Professional disclaimer

This tool is for planning and educational analysis. LTV is highly sensitive to churn, gross margin, customer quality, refunds, discounts, and retention assumptions. Use it as a decision-support tool, not as a substitute for a full financial model or professional advice.