Customer Lifetime Value (LTV) Calculator
Get the customer lifetime value you can actually spend against — contribution LTV, matched to how your business sells.
Written by Dorothy Ibrahim, 10+ years in banking & finance
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How we calculate this
This calculator estimates customer lifetime value with two models matched to how businesses actually sell: a repeat-purchase model (order value × frequency × lifespan) for stores and services, and a subscription model (ARPU ÷ churn) for recurring revenue. Crucially, it reports both revenue LTV and contribution LTV — the after-product-cost figure — because contribution LTV, not the flattering revenue number, is the ceiling on what you can spend to acquire a customer.
The formulas
- Revenue LTV (repeat-purchase model)
- average order value × purchases per year × average customer lifespan in years
- Contribution LTV
- revenue LTV × gross marginThe number to use for CAC decisions — revenue LTV includes money that goes straight out the door as product cost.
- Average lifetime (subscription model)
- 1 ÷ monthly churn rate, in monthsAt 0% churn the lifetime is unbounded; the tool caps the estimate at 60 months (5 years) to stay honest.
- LTV (subscription model)
- monthly ARPU × average lifetime in months; contribution LTV multiplies by gross margin
- Monthly contribution per customer
- ARPU × margin (subscription), or AOV × purchases per year × margin ÷ 12 (repeat purchase)Carries into the LTV:CAC tool to compute CAC payback.
Worked example
- Repeat-purchase example: say your average order is $60, customers buy 3 times a year, stay about 2.5 years, and your gross margin is 50%.
- Revenue LTV = $60 × 3 × 2.5 = $450 over a 30-month lifetime.
- Contribution LTV = $450 × 50% = $225 — that, not $450, is the most a customer is worth for acquisition decisions.
- Monthly contribution per customer = $60 × 3 × 50% ÷ 12 = $7.50.
- Subscription comparison at $49/month ARPU, 4% monthly churn, and 80% margin: average lifetime = 1 ÷ 0.04 = 25 months, revenue LTV = $49 × 25 = $1,225, contribution LTV = $1,225 × 80% = $980.
Rates, benchmarks & sources
- Repeat-purchase LTV = AOV × frequency × lifespan; subscription LTV = ARPU × margin ÷ churn; lifetime = 1 ÷ churn — textbook definitions, no external benchmark used — Standard unit-economics formulas
- Zero-churn subscription lifetimes are capped at 60 months (5 years) rather than shown as infinite — Tool convention
Figures current as of 2026-07-02. See our methodology & editorial standards for how constants are versioned and verified.
What this tool doesn’t model
- LTV is a projection built on averages — a new business with six months of data is extrapolating lifespan and churn it has not yet observed, so treat early LTV figures as hypotheses.
- Both models assume constant behavior: steady order frequency, flat ARPU, and a churn rate that does not change with customer age (in reality churn is usually highest in the first months).
- Uses gross margin only — it does not subtract the cost to serve, support, or retain customers, which matters for high-touch businesses.
- Ignores discounting: a dollar of contribution three years from now is treated the same as a dollar today.
- Averages hide segments — one loyal cohort and one churn-heavy cohort can produce a blended LTV that describes neither.
Frequently asked questions
What is the difference between revenue LTV and contribution LTV?
Revenue LTV is the total money a customer hands you over their lifetime; contribution LTV multiplies that by gross margin, leaving only what survives after product costs. In the worked example the customer pays $450 but is worth $225 in contribution. Acquisition math must use the contribution figure — spending against revenue LTV means spending money you never actually keep.
Which LTV model should I use?
Match it to how you charge. Stores and services with discrete repeat orders fit the repeat-purchase model (AOV × frequency × lifespan); anything with recurring billing — SaaS, memberships, subscription boxes — fits the subscription model, where churn determines lifetime (1 ÷ monthly churn). If you run both, model each revenue stream separately rather than blending them.
How does churn drive subscription LTV?
Average lifetime is the reciprocal of churn: at 4% monthly churn a customer stays 25 months on average; cut churn to 2% and the lifetime doubles to 50 months — and LTV doubles with it. That leverage is why retention work usually beats acquisition work dollar for dollar: halving churn doubles what every future customer is worth.
Why does the tool cap lifetime at 5 years when churn is 0%?
A 0% churn rate makes the formula predict an infinite lifetime and infinite LTV, which no real business should plan around — it usually just means you have not been measuring long enough to see churn yet. The tool caps the estimate at 60 months so the output stays a sane planning number rather than a spreadsheet fantasy.
How do I use LTV once I have it?
Compare contribution LTV to your fully-loaded customer acquisition cost. The LTV:CAC & Payback tool on this site takes the contribution LTV and monthly contribution per customer computed here, pairs them with your CAC, and renders the unit-economics verdict — the ratio plus how many months it takes to earn the acquisition cost back.