Enter average order value, purchases per year, customer lifespan and gross margin. Get lifetime value in gross profit, and your LTV:CAC if you add acquisition cost.
Or monthly revenue per subscriber.
12 for a monthly subscription.
For subscriptions: 1 ÷ annual churn rate.
Optional. What one customer costs to acquire.
Healthy. Each customer returns 4.0 times what they cost to win.
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LTV = average order value × purchases per year × customer lifespan in years × gross margin. A $60 order, four times a year, for three years, at a 50% margin is $360 of gross profit per customer.
Without the margin the same customer is worth $720 in revenue. That is the number most dashboards show, and it is the wrong one to set an acquisition budget against: you cannot spend revenue you never keep.
For a subscription, use monthly revenue per customer as the order value and 12 as purchases per year. Lifespan is 1 ÷ annual churn: lose 25% of customers a year and the average customer stays four years. With monthly churn, average lifetime in months is 1 ÷ monthly churn.
Divide lifetime value by the cost to acquire a customer. 3:1 is the common rule of thumb for a healthy business: each customer returns three times what it cost to win them, leaving room for overhead and profit. Under 1:1 every new customer loses money.
Read it with payback. A 4:1 ratio that takes three years to earn back is harder to fund than a 3:1 that pays back in four months. Pair this with the CAC calculator to see both.
Your maximum affordable CAC is LTV divided by the ratio you want to hold. At $360 of LTV and a 3:1 target, you can pay up to $120 to acquire a customer. That ceiling, not a first-order ROAS, is what decides how hard to push prospecting on a repeat-purchase business.