What This Calculator Estimates
This calculator estimates the profit-based lifetime value of a customer by projecting total revenue over their retention period, then applying your gross margin to show estimated profit rather than raw revenue.
Formula / Method Used
Revenue LTV = Average Order Value × Orders Per Year × Retention Years. Margin-Adjusted LTV = Revenue LTV × Gross Margin %.
Worked Example
A customer with a $75 average order, 4 orders per year, over 3 years generates $900 in revenue. At a 40% gross margin, the estimated profit-based LTV is $360.
How to Interpret the Result
This is the number to compare against customer acquisition cost, since it reflects actual profit, not just revenue. If your acquisition cost is close to or above this figure, the customer relationship may not be profitable.
Common Mistakes
- Comparing acquisition cost to revenue-based LTV instead of margin-adjusted LTV.
- Using an average margin that doesn't reflect your actual product mix.
- Ignoring that margin can change as a business scales.
- Assuming retention period stays constant across all customer segments.
Related Calculators
Frequently Asked Questions
What does this Customer LTV calculator estimate?
It estimates the profit-based lifetime value of a customer by applying your gross margin to projected revenue over their lifespan.
How is this different from the basic CLV calculator?
The basic CLV calculator estimates total revenue per customer. This version applies gross margin to show estimated profit, not just revenue.
What gross margin should I use?
Use your typical gross margin percentage: revenue minus cost of goods sold, divided by revenue.
Why does margin-adjusted LTV matter more for decisions?
Comparing acquisition cost to profit, not just revenue, gives a more accurate picture of whether a customer relationship is actually profitable.
Can I compare this against ad spend per customer?
Yes. If margin-adjusted LTV is well above your cost to acquire a customer, your spend is likely sustainable.
Last updated: July 2026