Customer LTV Calculator
Lifetime value on a gross-margin basis — the honest version. Then check your LTV:CAC ratio against the 3:1 DTC benchmark.
Result
LTV = AOV × orders/yr × margin × lifespan. Max CAC = LTV ÷ 3 (the 3:1 benchmark).
Why margin-basis LTV
A customer who generates $400 in revenue at 30% margin is worth $120 — not $400. If your CAC is $60, that's a 2:1 ratio on revenue but exactly breakeven on margin. Every scaling decision downstream (bids, offers, bundles) changes when you use the margin number.
Formulas used
- LTV = AOV × orders per year × gross margin × lifespan (years)
- LTV:CAC = LTV ÷ CAC
- Max affordable CAC = LTV ÷ 3
FAQ
What is a good LTV:CAC ratio?
3:1 is the standard DTC benchmark. Under 1.5:1 means you're likely overpaying for customers; over 5:1 suggests you could invest more aggressively in acquisition.
Revenue or margin basis?
Margin, always. Revenue-based LTV ignores COGS, shipping and fees — the exact costs that decide whether your CAC is affordable.
How do I estimate lifespan?
Use repeat-purchase data: if ~35% of customers place a second order and the tail decays from there, 1–2 years is a realistic span for most DTC brands. Cohort analysis in Shopify or your analytics stack gives the real curve.