Customer lifetime value (LTV) calculator

How to read these results

Customer lifetime value (LTV or CLV) is what a customer brings you over the whole time they buy from you. Here it is calculated in margin, not in revenue: it is the amount you can really spend to win and keep a customer.

The LTV to CAC ratio compares this value with what a customer costs to acquire. The time to pay back the CAC tells you after how many months of purchases a new customer becomes profitable.

The line "with one more order per customer" shows how much a single extra purchase adds to the value of every customer: it is often the cheapest growth lever for a store.

The customer lifetime value formula

• Margin per order = average order value × margin per order (%).
• Orders over a lifetime = orders per customer per year × customer lifespan in years.
• LTV (margin) = margin per order × orders over a lifetime.
• LTV to CAC ratio = LTV ÷ customer acquisition cost.
• Months to pay back the CAC = CAC ÷ (margin per order × orders per year ÷ 12).

A worked example

A store has a $60 average order and a 50% margin: each order leaves $30. Its customers order 1.8 times a year for 2.5 years, i.e. 4.5 orders. LTV: 30 × 4.5 = $135 of margin, for $270 of revenue. With a $25 CAC, the ratio is 5.4 : 1 and the CAC is paid back in 5.6 months.

If the same customers ordered 2.4 times a year instead of 1.8, they would place 6 orders over 2.5 years and the LTV would rise to $180: 33% more value per customer, without spending a cent more on acquisition.

Where to find your numbers in Shopify

• Average order value: Shopify's analytics show it for the period you choose.
• Orders per customer per year: divide the number of orders over 12 months by the number of customers who ordered in that period.
• Customer lifespan: if your store is recent, start with a cautious estimate (1 or 2 years) and adjust it as your history grows.
• Margin per order: calculate it with our profit margin calculator, after shipping and payment fees.

How to increase customer lifetime value

• Get customers to come back between orders: new product announcements, useful content, a space where they can talk to each other.
• Raise the average order value with bundles, add-ons and free shipping thresholds.
• Reward loyalty: perks for regular customers, early access, member-only content.
• Take care of after-sales: a quick answer to a question or a problem keeps a customer who would otherwise leave.

Frequently asked questions

How do I calculate customer lifetime value?

Multiply the margin of an average order by the number of orders a customer places per year, then by the number of years they stay a customer. For example, $30 of margin × 1.8 orders a year × 2.5 years = $135.

What is the difference between LTV and CLV?

None: LTV (lifetime value) and CLV (customer lifetime value) are two names for the same thing. Some calculate it in revenue, others in margin; the margin version is more useful for deciding how much you can spend on acquisition.

What is a good LTV to CAC ratio?

A ratio of 3:1 is often used as a benchmark: a customer brings in three times what they cost to acquire. Below 1:1, every new customer loses money. A very high ratio can also mean you are underinvesting in acquisition.

How can I calculate LTV for a new store?

Without history, use your current average order value and margin, and cautious assumptions for purchase frequency and lifespan. Recalculate every quarter with your real numbers: the LTV becomes reliable once you have a year of repeat orders.