Marketing & Finance
LTV Calculator
What is a customer worth over their lifetime, and how does that compare with what they cost to acquire?
- Time: 5 minutes
- With: Marketing, growth and finance
- You get: LTV, LTV:CAC and payback months
How to use this worksheet
- Enter the average value per order and how many orders a customer places per year.
- Enter the expected customer lifespan in years. If you know churn, lifespan = 1 / annual churn rate.
- Enter your gross margin so the result is profit, not revenue.
- Add CAC to get the ratio and the payback period.
Customer value
Averages for one customer segment.
Write down where the numbers come from and what would change them.
Prompts and example
Example
Segment: small business customers on the annual plan.
Results
Before you finish
- The numbers come from one customer segment.
- Margin is gross margin, not net margin.
- Lifespan is based on observed churn.
About LTV
LTV = average order value x orders per year x lifespan, multiplied by gross margin to get gross-profit LTV. LTV:CAC compares what a customer brings with what you spent to win them.
A ratio around 3:1 is a common benchmark, and payback within 12 months is typical for healthy subscription businesses. Benchmarks vary by industry and capital situation.
Recommended reading
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- The Ultimate Question 2.0: How Net Promoter Companies Thrive in a Customer-Driven WorldFred Reichheld
Learn how customer loyalty and retention drive lifetime value and long-term profitability.