Pulzeo

Customer lifetime value (LTV) calculator

Estimate what a customer is worth over their lifetime (LTV) based on your average order value, how often they buy and how long they stay. Add your margin to see the acquisition budget it justifies.

$

What a typical order is worth.

/ year

Orders per customer per year.

years

How many years the customer stays active.

%

Shows how much you can spend to win a customer.

Enter your average order value, purchase frequency and customer lifespan to estimate lifetime value.

What’s customer lifetime value (LTV)?

Customer lifetime value, or LTV, is the revenue, or the margin, a customer generates from their first purchase to their last. The simplest way to calculate it: average order value × purchases per year × lifespan in years. It turns a series of purchases into a single number you can act on.

Why LTV changes your ad budget

Working from the first sale alone understates what a customer is worth. If they come back, you can pay more to win them, which means accepting a higher CPA and a more aggressive max bid, while staying profitable over time.

LTV: revenue or margin?

When you set an acquisition budget, margin-based LTV is what counts: margin is what actually funds acquisition, not gross revenue. A high LTV on a thin margin justifies less spending than modest revenue on a fat one.

Common questions

How do you calculate customer lifetime value?

The simplest formula is: average order value × purchases per year × lifespan in years. For example, a $60 order, 4 purchases a year and 3 years of retention add up to a lifetime value of $720 in revenue. To plan your budget, you then convert that to margin.

What’s the maximum CPA based on lifetime value?

At most, the margin the customer generates over their lifetime. If a customer brings in $720 in revenue at a 40% margin, that’s $288 in margin: in theory, you can spend up to that amount to win them before losing money. In practice, you keep part of it as profit.

Should I work from lifetime value or from the first purchase?

If your customers come back, lifetime value paints a more accurate picture and justifies a higher acquisition cost than the first sale alone. Working only from the first purchase understates what a customer is worth and makes you turn down acquisitions that would have paid off.

Other calculators

ROAS calculatorCPA calculatorAd budget calculatorBreak-even calculatorConversion rate calculatorCPM, CPC and CTR calculatorMax bid calculator (max CPC)

Track your numbers continuously, across every account, with Pulzeo.

Start for free