Lifetime Value Calculator
What a Customer Is Worth Over Their Whole Relationship With You
A single transaction rarely tells the full story of a customer's value — a subscriber who stays two years is worth far more than the sum of their first invoice suggests. Lifetime value estimates that full relationship, either by projecting purchase behavior forward or by working backward from how quickly customers typically churn.
The Formula
Customer Value = Average Purchase Value × Purchase Frequency
LTV = Customer Value × Average Customer Lifespan (years)
Churn-based method:
LTV = (ARPU × Gross Margin %) / Churn Rate
Two Ways to Estimate the Same Number
The basic method suits businesses with clear repeat-purchase patterns, like retail or services. The churn-based method suits subscription businesses, where average revenue per user (ARPU) and a monthly or annual churn rate are already tracked.
| ARPU | Gross margin | Churn rate | LTV |
|---|---|---|---|
| $50 | 70% | 5% | $700.00 |
| $50 | 70% | 2% | $1,750.00 |
| $100 | 80% | 3% | $2,666.67 |
| $20 | 60% | 10% | $120.00 |
Because churn rate sits in the denominator, small improvements in retention produce disproportionately large gains in LTV — cutting churn from 5% to 2% more than doubled LTV in the table above.
Where This Calculation Matters
- Justifying acquisition spend — LTV sets the ceiling for how much a business can reasonably spend to acquire a customer.
- Subscription pricing — modeling how a price or margin change ripples through to lifetime value.
- Retention investment cases — the churn-based formula makes it explicit how much a retention program is worth in LTV terms.
- Investor and board reporting — LTV alongside CAC is a standard health-check pair for subscription and repeat-purchase businesses.
How to Use This Calculator
- Choose Basic or Churn-Based from the mode selector.
- For Basic, enter Average Purchase Value ($), Purchase Frequency (per year), and Average Customer Lifespan (years).
- For Churn-Based, enter Average Revenue per User ($), Gross Margin (%), and Churn Rate (%).
- Select Calculate to see the estimated lifetime value.
Related Calculations
Weigh this against the Customer Acquisition Cost Calculator, or see how churn assumptions were derived with the Churn Rate Calculator.