How is LTV calculated?

Multiply average revenue per period by gross margin and customer lifespan. For $150 per month at 80% margin over 18 months it is $2,160.

Why include gross margin in LTV?

Lifetime value should reflect profit, not revenue. Applying margin shows what the customer actually contributes after the cost to serve them.

What raises LTV most?

Lifespan, usually — longer retention compounds revenue and margin across more periods. Cutting churn is the most reliable lever, followed by pricing and margin.

How does LTV relate to CAC?

LTV sets the ceiling on acquisition spend. Compared with CAC via the LTV:CAC ratio and payback period, it shows whether acquisition is profitable and how fast it recovers.

Calculator · 049

LTV Calculator

Quantify what a customer is worth over their lifetime — and decide how much you can profitably spend to acquire and retain one.

Avg revenue / period

Gross margin

Customer lifespan

months

Customer LTV

—

Average

Scenario lens Current · Benchmark · Optimized

Leverage

Formula

LTV = Average revenue per period × Gross margin × Customer lifespan

Understanding lifetime value

Reference material — the calculator above stays the primary tool.

What LTV measures

Lifetime value is the gross profit a customer generates over their entire relationship — revenue per period, adjusted for margin, across their lifespan. It is the ceiling figure for unit economics: how much a customer is ultimately worth determines how much you can spend to acquire and keep them.

Margin matters as much as revenue here; a high-revenue customer on thin margin can be worth less than a smaller, durable, high-margin one.

How to read your result

The headline is LTV at your current lifespan. The scenario lens then projects it at a longer benchmark and optimized lifespan, pricing what retention adds — since lifespan is usually the most movable input.

Use it with acquisition cost to see how much room you have to invest in growth.

What drives LTV

Three inputs set LTV, with retention the biggest lever. Treat these as orientation.

Context	Typical median
Revenue per period	Pricing & usage
Gross margin	Cost to serve
Lifespan	Retention & churn
Expansion	Revenue growth over time

Levers that raise LTV

Lifespan usually moves LTV most because it compounds the other two: every additional period of retention adds full margin. Raise it by cutting churn, then lift revenue per period and margin. Model a longer lifespan as a scenario above.

LTV on its own is not enough

Read LTV against acquisition cost using the LTV:CAC and payback tools, which the related tools cover. A large LTV that takes too long or costs too much to earn can still be unprofitable, so pair it with CAC and payback.