Customer Lifetime Value (LTV) & Max CAC Calculator
Find out what a customer is worth over time, and the most you can pay to acquire one.
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What does the Customer Lifetime Value Calculator do?
Customer lifetime value (LTV) is the gross profit a customer brings you over the time they keep buying. Divide it by a target LTV to CAC ratio and you get the most you can afford to pay to acquire that customer. This calculator uses your average order value, gross margin, how often customers buy and how long they stay.
1. How to use this customer lifetime value calculator?
- 1Enter your average order value and gross margin.
- 2Add how often a customer orders per year, and for how many years they typically stay.
- 3Read the LTV and the maximum customer acquisition cost (CAC) for your target ratio.
What each input means
- Average order value
- per order
- Gross margin
- % after product cost
- Orders per customer per year
- orders
- Customer lifetime
- years
- Target LTV : CAC ratio
- a common target is 3
2. How is the customer lifetime value calculator calculated?
- Lifetime revenue = order value × orders per year × years
- LTV (gross profit) = lifetime revenue × gross margin
- Max CAC = LTV ÷ target ratio
- First-order profit = order value × gross margin
A customer who spends $45 twice a year for 2 years brings $180 of revenue. At a 55% gross margin their LTV is $99. With a 3:1 target ratio, the most you should pay to acquire them is $33. The first order alone earns $24.75 of gross profit.
3. Who should use this tool?
- Stores with repeat customers who are unsure how much they can spend to acquire them.
- Owners deciding whether to accept a first order that only breaks even.
- Brands planning email, SMS and loyalty work.
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Check dropshipping profitCustomer Lifetime Value Calculator: frequently asked questions
What is a good LTV to CAC ratio?
A ratio of about 3 to 1 is a common target, but the right number depends on your cash flow and how sure you are of repeat purchases.
How do I find how often customers buy?
Shopify’s customer and cohort reports show repeat purchase rates. If you are new, use a cautious guess and update it as data comes in.
Should I use revenue or profit for LTV?
Use gross profit. Revenue overstates what you can spend on acquisition because it ignores product cost.
What if I only sell one-time products?
Set orders per year to 1 and lifetime to 1. Your max CAC is then based on the first order alone.
Services that move these numbers
Email/SMS Flows & Upsells
Welcome, cart and post-purchase flows plus upsells that lift the value of every order.
Learn more →Meta Ads
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Turn more of your existing traffic into orders by fixing what stops visitors from buying.
Learn more →Want an expert to look at your real numbers?
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