Customer Lifetime Value Calculator
Lifetime value is usually quoted in revenue, over a lifespan nobody measured, without discounting money that arrives in two years. This works it out in contribution, shows what that stream is worth today, and puts it next to what you pay to acquire a customer.
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A lifetime value you cannot finance is a forecast, not an asset.
- The calculator
What a customer is worth, in contribution
Six inputs. Change any of them and every figure updates as you type.
Formula: contribution per year = order value × contribution margin × orders per year. Lifetime contribution = that figure × lifespan. Present value discounts the same stream as an annuity: contribution per year × (1 − (1 + rate)−years) ÷ rate. The ratio uses the undiscounted lifetime figure, which is the convention; the present value tile is there so you can see what the convention costs you. Nothing is sent anywhere — this runs entirely in your browser.
- Reading it
Why most lifetime value numbers are too big
Three assumptions do almost all the damage, and two of them are usually never measured.
The first is revenue instead of contribution. A lifetime value quoted in revenue describes money that passed through the business, not money it kept, and on a 30% margin it overstates the real figure by more than three times. The second is lifespan: five years is the number people reach for, and almost nobody has checked it against their own cohorts.
The third is time. Contribution arriving in year three is worth less than contribution arriving now, and if you are funding acquisition from cash flow it may be worth a great deal less. That is what the discount rate is for, and why the present value tile turns amber when it falls below what you paid to acquire the customer — a perfectly healthy-looking ratio can hide a payback you cannot finance.
- Measure lifespan from cohorts rather than assuming it
- Use contribution margin, never gross margin or revenue
- Read the payback months alongside the ratio, not instead of it
- Getting it wrong
Four ways lifetime value gets inflated
Each of these makes a customer look more valuable than the accounts will ever show.
Quoting it in revenue
The most common error by a distance. Lifetime revenue is not lifetime value; only the contribution is yours, and the gap is the whole margin structure of the business.
Assuming the lifespan
A number nobody measured, usually rounded up. If your cohort data shows most customers stop after eighteen months, using three years doubles the answer.
Averaging across everybody
A blended lifetime value across one-time buyers and subscribers describes neither. Segment by acquisition channel first — the cheapest channel often delivers the worst cohort.
Ignoring when the money arrives
A three-year payback is a financing decision. The present value and payback tiles exist so that decision is taken deliberately rather than discovered later.
Our retention guide covers measuring repeat behaviour by cohort, which is where the lifespan and frequency inputs should come from. If you cannot state a lifespan honestly, the LTV calculator derives the order count from a repeat rate instead.
- Questions
Lifetime value FAQs
The questions this calculator usually raises.
Is LTV the same as CLV?
Yes. Lifetime value and customer lifetime value are the same idea, and both are used interchangeably in eCommerce. What matters far more than the initials is whether the figure is quoted in revenue or in contribution, because those two answers differ by the whole margin structure of the business.
What is a good LTV to CAC ratio?
Three to one is the convention, borrowed from software businesses, and it is a rule of thumb rather than a law. What actually matters is whether the ratio is above one on contribution, and whether you can finance the payback period. A 2:1 ratio with a four-month payback is a healthier business than a 4:1 ratio with a three-year one.
Where do I get the lifespan figure?
From your own order data. Group customers by the month of their first order and look at when purchasing stops in each cohort. Most stores that measure it for the first time find the honest number is considerably shorter than the one they had been quoting.
Should I discount future contribution?
If the money is material and arrives more than a year out, yes. Discounting answers a real question: what is a stream of future contribution worth to the business today, given that cash is finite and has alternative uses. Set the rate to zero if you would rather see the undiscounted figure.
Why does the present value tile turn amber?
Because the discounted lifetime contribution has fallen below what you paid to acquire the customer. The undiscounted ratio can still look acceptable while that is true, which is exactly the situation the tile exists to surface.
How does this connect to acquisition cost?
Directly. Lifetime value sets the ceiling on what you can afford to pay for a customer, and the CAC calculator works out what you are actually paying. Running both on the same period is the point.
- Next
Related tools and reading
CALCULATOR
The other half of the ratio: blended CAC, paid CAC and the break-even your margin supports.
CALCULATOR
Works out the contribution margin this calculator asks for, from your price and cost lines.
FREE AUDIT
Five working days across six disciplines, including whether your cohort data supports the lifespan you are using.
Lifetime value built on an assumed lifespan?
It usually is, and the honest figure is usually shorter. The free audit rebuilds it from your own cohorts rather than from a number somebody picked.