LTV calculator that tells you what you can afford to pay for a customer

Lifetime value is the revenue, or better the gross profit, one customer produces from the first purchase to the last. The simple model needs three numbers: what a customer pays per purchase or contract period, how many of those happen per year, and how many years a customer stays. Multiply them and you have revenue LTV. Multiply by gross margin and you have the version worth comparing with acquisition cost, because you cannot spend revenue on ads, only margin.

If you track churn rather than lifetime, convert it: a 25 percent annual churn rate means the average customer stays 1 ÷ 0.25 = 4 years. Monthly churn works the same way in months. Both conversions assume a steady rate, which overstates lifetime for businesses where most churn happens in the first months; if that is you, use the observed median lifetime instead.

LTV answers the question every bid strategy needs answered: how much is a new customer worth, and therefore how much can I pay to get one. The rule of thumb is a customer acquisition cost of one third of gross-margin LTV, the 3:1 ratio. A customer worth €10,800 in margin supports a CAC of €3,600; scale spend past that and every new customer makes the business poorer.

The second number the calculator returns is payback: CAC divided by monthly gross profit per customer. It is the cash view of the same relationship. A 3:1 ratio with a 24-month payback is healthy on paper and hard on the bank account, because two years of acquisition spend sit unrecovered. Under twelve months is comfortable for most SaaS and service businesses.

Agencies, consultancies, coaches, clinics and B2B service firms rarely have a subscription, so the SaaS formula (ARPU ÷ churn) does not fit. The purchase-frequency model does: an agency retainer is twelve purchases a year, a dental patient is two visits a year for eight years, a consultant's client is one project a year for three years. Fill in the frequency and the lifetime the way your business actually works, and the LTV comes out in the same terms as your CAC.

One practical use: LTV by channel. Customers from search often stay longer than customers from social; referrals stay longest of all. If the customer record carries the channel it came from, LTV per channel tells you where a higher CAC is justified. Without it, one blended LTV gets spread evenly over channels that did not earn it.