How lifetime value is calculated
This is the classic, general-purpose LTV formula — it works for retail, e-commerce, restaurants, or any business where customers make repeat purchases, rather than paying a fixed recurring subscription:
Revenue LTV = Average Purchase Value × Purchase Frequency × Customer Lifespan Multiply what a customer typically spends per purchase by how many times a year they buy, then by how many years they stay a customer, and you get the estimated lifetime revenue generated by an average customer.
$75 per purchase × 4 purchases/year × 3 years → $900 lifetime revenue Revenue LTV vs. gross profit LTV
Revenue LTV tells you how much sales revenue a customer is expected to generate over their lifetime — not what's left after the direct costs of the goods or services you deliver. Add Gross Margin and the calculator also shows Gross Profit LTV, the portion of that lifetime revenue remaining after those direct costs:
Gross Profit LTV = Revenue LTV × Gross Margin A $900 lifetime customer at a 40% gross margin generates $360 in lifetime gross profit. This can help you estimate how much you can afford to spend acquiring a customer before considering other operating expenses.
When to use this vs. a churn-based model
This formula assumes a customer keeps buying at a roughly steady pace for a known number of years — a useful simplified model for retail, e-commerce, restaurants, and other repeat-purchase businesses. It doesn't model any month-to-month probability of leaving the way a subscription business does. If your business runs on monthly recurring revenue with a churn rate, the SaaS LTV Calculator models that directly — including optional account expansion and an LTV:CAC ratio.
Frequently asked questions
Where do I get "Customer Lifespan" if I don't already know it?
If you don't track it directly, a rough estimate from your own sales history usually beats guessing — look at how long your typical repeat customer keeps buying before they stop. If you don't have enough historical data yet, use a reasonable assumption for your business and update it as you collect more customer data.
Is Purchase Frequency always "per year"?
In this calculator, yes — Purchase Frequency and Customer Lifespan need to share a consistent time unit for the multiplication to mean anything, and years is the most common way this is expressed. If you know purchases per month instead, multiply by 12 first to get an annual figure before entering it.
Why is Gross Margin optional here?
Revenue LTV is useful on its own for questions like "how much revenue does a typical customer generate," even without knowing your margins. Gross Margin is there when you want to estimate how much of that revenue remains as gross profit after the direct costs of serving the customer. It is optional so the calculator stays useful either way.