Customer Lifetime Value (LTV) Calculator
Calculate how much each customer is worth over their lifetime — and what retention improvements actually mean in dollars.
Frequently Asked Questions
What is customer lifetime value (LTV)?
LTV is the total revenue (or profit) you expect from a customer over the entire time they do business with you. It guides how much you can afford to spend acquiring new customers (CAC) and retaining existing ones.
What is the LTV formula used here?
LTV = Average Order Value × Purchases Per Year × Average Lifespan × Gross Margin. Average Lifespan = 1 / (1 − Retention Rate). A 90% retention rate gives 10 years of expected lifespan.
What is a good LTV:CAC ratio?
A ratio of 3:1 or higher is generally healthy — you earn three dollars for every dollar spent acquiring a customer. Below 1:1 means you are losing money on each new customer.
Why does a small improvement in retention rate matter so much?
Because retention appears in the denominator of the lifespan formula. Going from 80% to 90% retention doubles your expected customer lifespan from 5 to 10 years — which doubles LTV. The sensitivity table shows this effect.
How does DMHub help improve LTV?
DMHub's win-back campaigns, loyalty programs, and automated WhatsApp sequences keep customers engaged between purchases. Higher engagement directly increases retention rate — the biggest lever on LTV.
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