Customer lifetime value (LTV or CLV) is the total profit you earn from an average customer across their whole relationship with your brand — not just their first order. It's what tells you how much you can afford to spend to win a customer.
Get it right and paid acquisition becomes a math problem instead of a gamble. Here's how to calculate it and the one ratio to watch.
Add your acquisition cost to see the LTV:CAC ratio.
CAC — leave 0 to skip
A practical LTV formula is: LTV = Average order value × Orders per year × Customer lifespan (years) × Gross margin. If a customer spends $65 per order, buys 2.5 times a year for 3 years at a 55% margin, their lifetime value is 65 × 2.5 × 3 × 0.55 ≈ $268 in profit.
Always use gross margin, not revenue — LTV is about profit you keep, since that's what funds acquisition. The calculator above does this in one step.
On its own, LTV is only half the story. Compare it to CAC (customer acquisition cost): the LTV:CAC ratio shows whether growth is sustainable. A common benchmark is 3:1 — you earn three dollars of lifetime profit for every dollar spent acquiring the customer.
Below ~1:1 you lose money on every customer. Far above 3:1 can mean you're under-investing in growth and leaving market share on the table.
Three levers move LTV: buy more often (email/SMS flows, subscriptions, replenishment reminders), spend more per order (bundles, upsells, free-shipping thresholds), and stay longer (better product, service, and loyalty).
Small retention gains compound: increasing repeat rate even slightly can lift LTV enough to unlock ad channels that were previously unprofitable.
A widely used benchmark is 3:1 — three dollars of lifetime gross profit for every dollar of customer acquisition cost. Around 1:1 you're breaking even, while much higher than 3:1 may signal you're under-investing in growth.
Use profit. Multiply lifetime revenue by your gross margin so LTV reflects the money you actually keep — that's what can be spent on acquiring the next customer.
Raise purchase frequency (email/SMS, subscriptions), increase average order value (bundles and upsells), and improve retention so customers stay longer. Even small retention gains compound into meaningfully higher LTV.
Connect your store and watch these numbers update themselves — no spreadsheets.
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