Free tool
Customer lifetime value calculator
Customer lifetime value is average order value times orders per year times years as a customer. Multiply by your margin to get profit. That profit is the ceiling on what a customer can cost you to win.
Lifetime profit
$300
Lifetime revenue
$600
Lifetime profit is $300. A customer pays back what they cost on order 1.
- LTV to CAC
- 8.6 to 1
- Left after winning them
- $265
- Payback order
- 1
Work out your numbers
From the last 12 months in your Shopify reports.
What one more order is worth
On the example store, every extra order per year adds the same profit for each customer. This is why repeat orders matter so much.
| Orders per year | Lifetime profit |
|---|---|
| 1 | $120 |
| 1.5 | $180 |
| 2 | $240 |
| 2.5 | $300 |
| 3 | $360 |
| 4 | $480 |
Example: $80 an order, 50% margin, 3 years.
Three made-up stores, worked through
These numbers are invented to show the shape of the sum. A small order bought often can beat a big one bought once.
- Coffee subscription
- $270lifetime profit, on $600 revenue$30 an order, 10 a year, 2 years, 45% margin
- Clothing brand
- $289lifetime profit, on $525 revenue$70 an order, 2.5 a year, 3 years, 55% margin
- Furniture store
- $360lifetime profit, on $900 revenue$600 an order, 1 a year, 1.5 years, 40% margin
Four ways to raise it
- A second order
- Post-purchase email and replenishment reminders bring people back without paying for the click again. Klaviyo email
- A bigger order
- Bundles and free shipping thresholds lift order value on every sale. Check your margin
- A better margin
- A small margin gain lifts lifetime profit across every order a customer ever places. Check your margin
- A cheaper first sale
- A higher conversion rate lowers what each new customer costs to win. Shopify CRO
What this sum leaves out
- Averages hide your best and worst customers. A few repeat buyers can carry the number.
- Most first-time buyers may never return, so a new store's years as a customer is a guess.
- Returns, discounts and support costs aren't in it unless your margin already counts them.
- Money earned in three years is worth less than money today, and this sum ignores that.
How the sums work
Worked out in your browser from what you type. Nothing is stored.
- Lifetime revenue
- Average order value times orders per year times years. $80, 2.5 orders and 3 years make $600.
- Lifetime profit
- Lifetime revenue times gross margin. $600 at 50% is $300.
- LTV to CAC
- Lifetime profit divided by the cost to win a customer. $300 against $35 is 8.6 to 1.
- Payback order
- The order where a customer has paid back what they cost to win. A $40 profit per order covers $35 on the first order.
Lifetime value questions, answered
How do I calculate customer lifetime value?
Multiply average order value by orders per year by the number of years a customer stays. Then multiply by your gross margin to turn revenue into profit.
Should I use revenue or profit?
Profit, for any decision about spending. Revenue makes a customer look more valuable than they are, because it ignores what the products cost.
What is a good LTV to CAC ratio?
A common rule of thumb is 3 to 1, but it is a rule of thumb, not a law. Far below it, you may be paying too much to win customers. Far above it, you may be spending too little on growth.
How do I find my orders per year?
Divide your orders in the last 12 months by the customers who placed them. The helper in the tool does this for you from three numbers in your Shopify reports.
How long does a customer stay?
If you don't know yet, use a low number. A new store can't have years of data, and a hopeful guess makes every other number look better than it is.
Does this predict the future?
No. It is a simple sum from averages. Real customers vary, and some never come back, so use it to compare choices rather than as a forecast.
Want the whole store read?
The Shopify Growth Diagnostic reads your store, your numbers and your search traffic, and tells you what to fix first. $997, fixed price, 5 days.