Resources
Free LTV (Life Time Value) Calculator
Calculate the lifetime value of your customers with this free calculator.
Resources
Calculate the lifetime value of your customers with this free calculator.
LTV
0 €
LTV Formula: Average Monthly Revenue x (Gross Margin / 100) x Retention Months
Lifetime Value (LTV) estimates the total revenue a customer will generate throughout their entire relationship with your business. A basic formula is to multiply the average purchase value by the annual purchase frequency and by the average duration of the customer relationship. For example, a customer who spends €50 per month for 2 years has an LTV of €1,200.
Lifetime value (LTV) lets you know how much you can afford to invest in acquiring a new customer (CAC) profitably. It also helps you segment customers by value, prioritize retaining the most profitable ones, and design more effective upselling and cross-selling strategies.
The recommended ratio is that LTV be at least 3 times higher than CAC (LTV:CAC of 3:1). If the ratio is lower, you're investing too much in acquisition relative to the value each customer generates. If it's much higher, you may be being too conservative with your acquisition investment and allowing the competition to grow.
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