Customer Lifetime Value Calculator | LTV, CLV & CAC Payback
Calculate customer lifetime value using three models: historic average order value, subscription churn-based LTV, and discounted predictive CLV. Returns LTV:CAC ratio, payback period, and cohort-level revenue projection to guide acquisition spend decisions.
What Is the Customer Lifetime Value Calculator | LTV, CLV & CAC Payback?
Customer Lifetime Value (LTV or CLV) is the total revenue a business can expect from a single customer over the entire duration of their relationship. It is the single most important number for evaluating whether your marketing spend makes economic sense and for setting CAC targets.
- ▸Historic model — uses AOV, purchase frequency, gross margin, and average lifespan from your CRM or analytics. Best for established e-commerce businesses with transaction history.
- ▸Subscription model — the gold-standard formula for SaaS: LTV = (MRR × margin) / churn. Reducing churn by 1 percentage point often increases LTV more than any acquisition campaign.
- ▸Predictive DCF model — discounts each future period's expected revenue by both the probability of the customer churning and the time value of money. Most rigorous for investors and strategic planning.
- ▸LTV:CAC ratio — below 1x means you're destroying value. 1–3x means acquisition is expensive relative to return. Above 3x is the healthy benchmark; above 5x may indicate underinvestment in growth.
Formula
Three distinct models serve different business types. Each captures a different aspect of customer revenue potential.
AOV × Freq × Margin × Lifespan
Best for e-commerce with historical transaction data. Requires knowing avg order value and typical customer lifespan.
(MRR × Gross Margin%) / Monthly Churn
SaaS and subscription businesses. Assumes steady-state churn and no expansion revenue.
Σ [Rev × (1−churn)^t / (1+d/12)^t]
DCF model summing discounted future cash flows weighted by survival probability. Most accurate.
How to Use
- 1
Choose your model tab: Historic for transaction data, Subscription for SaaS/recurring, Predictive for DCF analysis.
- 2
Historic tab: enter average order value, purchase frequency per year, gross margin %, and customer lifespan in years.
- 3
Subscription tab: enter MRR per customer, gross margin %, monthly churn rate %, and optional CAC.
- 4
Predictive tab: enter monthly revenue per customer, monthly churn %, annual discount rate %, and projection horizon in months.
- 5
Enter your Customer Acquisition Cost (CAC) to calculate LTV:CAC ratio and payback period in months.
- 6
Click Calculate LTV to see results for the active model tab.
- 7
Scroll down to the comparison table to see all three model LTVs side by side.
- 8
Use the LTV:CAC ratio and payback bands to benchmark unit economics against industry standards.
- 1
Select the model tab that matches your business type — Historic for e-commerce, Subscription for SaaS, Predictive for investor-grade analysis.
- 2
For Historic: enter your average order value in dollars, annual purchase frequency (e.g. 3.5 means 3.5 orders per year), gross margin percentage, and average customer lifespan in years.
- 3
For Subscription: enter monthly recurring revenue per customer, gross margin (typically 60–85% for SaaS), monthly churn rate (e.g. 2.5 for 2.5%), and CAC.
- 4
For Predictive: enter monthly revenue per customer, monthly churn, your company's annual discount rate (typically 8–15% for venture, 10% for public companies), and a projection horizon (default 36 months).
- 5
Enter your Customer Acquisition Cost (CAC) in any model to unlock the LTV:CAC ratio and payback period calculations.
- 6
Click Calculate LTV, then scroll down to the comparison table to see all three model outputs side by side.
Example Calculation
SaaS business — Subscription model
Healthy unit economics. At 5.36x LTV:CAC, the business can invest aggressively in growth channels.
E-commerce — Historic model
Very efficient acquisition. Rule of thumb: target CAC below 1/3 of LTV.
Enterprise SaaS — Predictive model
Predictive model discounts future cash flows, giving a conservative investor-grade LTV figure.
Understanding Customer Lifetime Value | LTV, CLV & CAC Payback
LTV Benchmarks by Industry
| Industry | Typical LTV Range | LTV:CAC Target | Avg. Payback Period |
|---|---|---|---|
| SaaS (SMB) | $500–$5,000 | 3–5x | 6–18 months |
| SaaS (Enterprise) | $20,000–$200,000+ | 3–7x | 12–24 months |
| E-commerce (DTC) | $100–$800 | 3–5x | 3–12 months |
| Mobile App (subscription) | $30–$300 | 2–4x | 3–9 months |
| Fintech / Insurance | $500–$10,000 | 3–6x | 12–36 months |
| Media / Content | $20–$200 | 2–4x | 1–6 months |
The Impact of Churn on Subscription LTV
In the subscription model, LTV = MRR × Margin / Churn. This means LTV scales hyperbolically with churn reduction. A business churning at 5%/month has an average customer life of 20 months. Reducing churn to 2%/month extends that to 50 months — a 2.5x improvement in LTV with no change in pricing.
| Monthly Churn | Avg. Customer Life | LTV at $100 MRR / 70% margin |
|---|---|---|
| 0.5% | 200 months | $14,000 |
| 1% | 100 months | $7,000 |
| 2% | 50 months | $3,500 |
| 3% | 33 months | $2,333 |
| 5% | 20 months | $1,400 |
| 10% | 10 months | $700 |
Using LTV to Set Maximum Bid Prices
LTV directly determines how much you can afford to spend on customer acquisition across every channel. A common rule: set your target CAC at LTV / 3 to maintain a healthy 3x ratio. For paid search, this translates to: Max CPC = (LTV / 3) × Conversion Rate. For a $3,000 LTV product with a 2% landing page conversion rate, your max CPC would be $3,000 / 3 × 0.02 = $20.
Expanding LTV: Retention, Upsell, and Cross-sell
- ▸Reduce churn: Invest in onboarding, customer success, and product stickiness. Each 1% reduction in monthly churn compounds significantly over time.
- ▸Upsell to higher tiers: Moving 20% of customers to a tier with 50% higher ARPU increases blended LTV by 10%. Feature-gating and usage-based pricing are effective triggers.
- ▸Cross-sell adjacent products: Customers who use multiple products churn at significantly lower rates (often half the single-product churn rate).
- ▸Increase purchase frequency: For e-commerce, subscription boxes, loyalty programs, and triggered email win-backs can increase purchase frequency by 20–40%.
- ▸Improve gross margin: Operational efficiencies, better supplier terms, and pricing optimization all directly multiply LTV without changing volume.
Frequently Asked Questions
What is a good LTV:CAC ratio?
The widely-cited benchmark is 3:1 — meaning a customer generates three times more lifetime value than it cost to acquire them. Ratios below 1x indicate you are losing money on customer acquisition. Ratios of 5x or higher, while excellent, may signal underinvestment in growth.
Why do the three models give different LTV numbers?
They make different assumptions. The historic model assumes a fixed lifespan. The subscription model assumes churn is constant and applies forever (making it the most optimistic). The predictive model discounts future cash flows and uses a finite horizon, making it the most conservative and most accurate for investor reporting.
What discount rate should I use for the predictive model?
Typically 8–15% annually. A 10% annual discount rate is a common default and roughly matches the historical equity risk premium. Early-stage startups may use 15–20% to reflect higher uncertainty. Public companies often use their WACC, typically 8–12%.
What should I include in CAC?
CAC should include all sales and marketing costs divided by the number of new customers acquired in a period. This includes ad spend, agency fees, sales salaries, marketing tools, and promotional discounts. Fully-loaded CAC gives a more honest picture than blended or partial CAC.
How can I improve my LTV?
For subscription businesses, reducing churn is the highest-leverage action — even a 0.5% reduction in monthly churn can increase LTV by 20–40%. For e-commerce, increasing purchase frequency through email/loyalty programs and increasing gross margin through better sourcing or pricing are the main levers. Upsells and cross-sells that increase average order value also compound strongly.
You Might Also Like
Explore 360+ Free Calculators
From math and science to finance and everyday life — all free, no account needed.