LTV Calculator
Lifetime Value helps you avoid under-scaling profitable channels and over-scaling low-retention campaigns.
Quick answer: LTV estimates total gross profit a customer generates over their retained lifetime.
Formula
LTV = Average Order Value * Purchase Frequency * Gross Margin * Retention Period
Compare LTV:CAC. For many SaaS and subscription models, 3:1 is a common baseline.
Use with CAC
- If LTV:CAC is less than 1.5, acquisition is likely too expensive.
- If LTV:CAC is 2 to 3, optimize retention and onboarding before aggressive scaling.
- If LTV:CAC exceeds 3 with stable payback, scaling is usually safer.
What LTV Means for Decision-Making
LTV estimates future gross profit potential per acquired customer. It helps determine how much CAC is rational today and whether current ROAS is sustainable once retention is observed. Use LTV with CAC, payback, and MER for full budget decisions.
How to Evaluate Your Result
- Check whether LTV assumptions are cohort-based or blended averages; cohort views are usually more reliable.
- Stress-test retention and margin assumptions with conservative, base, and upside cases.
- Recalculate monthly as pricing, churn, and product mix change.
Realistic Business Scenarios
- Subscription SaaS: LTV improves after onboarding fixes reduce month-2 churn, allowing safer CAC increases.
- DTC brand: first-order ROAS is modest, but high repeat rate lifts true LTV and keeps blended MER healthy.
- Agency lead-gen: strong close value but high churn lowers realized LTV, forcing tighter acquisition caps.
When to Use LTV and Common Misunderstandings
- Use LTV when setting CAC caps, channel mix, and acceptable payback windows.
- Do not use revenue-only LTV for profitability decisions; gross margin must be included.
- Do not assume historical retention persists during aggressive scale without monitoring cohort quality.
Methodology and Calculation Logic
This page uses a transparent multiplicative model: order value times purchase frequency times gross margin times retention period. It is an estimate, not a guarantee, and should be refreshed with actual cohort performance.
Accuracy Verified
Last reviewed on February 20, 2026 against industry data, platform changes, and user feedback. This calculator's formulas and benchmarks remain current.
LTV Calculator Module
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