Customer Lifetime Value (LTV) Calculator

Because you spend acquisition dollars out of margin, not revenue. A $480 lifetime-revenue customer at a 40% margin only ever produces $192 to cover CAC, overhead and profit. Revenue-based LTV makes a $150 CAC look fine when it actually consumes nearly 80% of everything that customer will contribute. Always compare CAC to margin-based LTV.

Pull them from your own order data: purchases per year is total orders in the last 12 months divided by unique customers, and retention can be estimated from what share of customers ordered again in each cohort. New stores without history should start conservatively — one to two purchases a year and a single year of retention — and update as real cohorts mature.

The widely used benchmark is 3:1 — lifetime margin at least three times acquisition cost, leaving room for overhead, returns and profit. Below 2:1, growth usually destroys cash; above 5:1, many operators would argue you are under-investing in acquisition. The $192 LTV in the default example supports a CAC up to roughly $64 at 3:1.

For horizons of one to three years, most e-commerce operators skip formal discounting — forecast error in retention swamps the time value of money. What matters more is honesty about the retention input: a customer projected to stay three years but who actually churns after one inflates LTV by 3×. Prefer short, defensible horizons over long optimistic ones.