LTV Calculator

What is LTV?

Customer Lifetime Value (LTV) measures the total revenue a business can expect from a single customer account throughout the business relationship. It's a critical metric for understanding how much you can afford to spend on customer acquisition and for making strategic decisions about marketing, pricing, and customer retention.

How to Calculate LTV

Example Calculation

If your average customer generates $50 per month and stays for 12 months:

• ARPU: $50
• Retention Period: 12 months
• LTV: $50 × 12 = $600

This means each customer is worth $600 over their lifetime with your business.

What is a Good LTV?

A good LTV varies significantly by industry and business model:

• Below $50: Low - needs improvement
• $50 - $100: Moderate - acceptable for some businesses
• $100 - $500: Good - healthy customer value
• Above $500: Excellent - high-value customers

LTV vs CAC

The LTV:CAC ratio is a crucial metric for business health. A ratio of 3:1 or higher is generally considered healthy. This means you should earn at least $3 in customer lifetime value for every $1 spent on customer acquisition. If your LTV:CAC ratio is below 3:1, you may be spending too much on acquisition or need to improve customer retention and revenue.

Tips to Increase LTV

• Improve retention: Focus on customer satisfaction and support
• Increase ARPU: Upsell and cross-sell to existing customers
• Reduce churn: Identify and address reasons for customer departure
• Build loyalty programs: Reward long-term customers
• Personalize experience: Tailor offerings to customer needs
• Optimize pricing: Test different pricing strategies to maximize revenue