Simple model based on average order value — doesn't account for cohort churn curves or gross margin. Use as a directional benchmark.
Free LTV Calculator
LTV matters most when compared against CAC (Customer Acquisition Cost) — a common rule of thumb is targeting an LTV:CAC ratio of at least 3:1, meaning each customer is worth at least 3x what it costs to acquire them. This simple model uses average order value, not a cohort-based retention curve, so treat it as a directional estimate.
Worked Example
Example: Average order value $50, customers purchase 4 times/year, average customer relationship lasts 3 years. LTV = $50 × 4 × 3 = $600.
Formula
LTV = Average Order Value × Purchase Frequency (per year) × Average Customer Lifespan (years)
Worked Example
Example: Average order value $50, customers purchase 4 times/year, average customer relationship lasts 3 years. LTV = $50 × 4 × 3 = $600.
Formula
LTV = Average Order Value × Purchase Frequency (per year) × Average Customer Lifespan (years)