LTV Calculator (Customer Lifetime Value)
LTV (or CLV) represents the total net profit a customer brings to your business during the entire duration of your relationship. Knowing LTV is essential for setting the maximum CAC (Acquisition Cost).
Frequently Asked Questions (FAQ)
Is LTV revenue or profit?
In a strict marketing-business sense, LTV should represent net profit (Gross Margin). If you calculate it from revenue, you might mistakenly think you can afford a higher CAC than is realistic, leading to unit-level losses.
How to increase LTV?
There are four ways: 1. Increase AOV (upsell, cross-sell), 2. Increase frequency (email marketing, loyalty programs), 3. Increase lifespan (improving product quality and customer service to reduce churn), or 4. Improve margin (better sourcing, pricing).
What if I don't know the lifespan?
For new businesses, use a conservative estimate (e.g., 1-2 years). For stable e-shops, calculate how long ago a customer made their first purchase and when they made their last. The difference is the average lifespan. Or use retention rate: Lifespan ≈ 1 / Churn Rate.
Why it matters
Focusing only on the first purchase is a common mistake. If a customer costs more to acquire than they
bring in the first order, you are "losing" money today to "win" tomorrow. LTV tells you exactly how much
you can afford to lose on the first order to build a long-term profitable business.
Without knowing LTV, you cannot optimize acquisition spend. You might be under-investing (missing growth) or
over-investing (burning cash). LTV is the foundation of sustainable growth strategy.