Why Calculate Customer Lifetime Value?
Customer Lifetime Value (LTV) tells you how much a customer is worth over their entire relationship with your business.
The Problem Without LTV
Scenario: You spend ₹50 Lakh on Facebook Ads and acquire 5,000 customers.
Question: Is ₹1,000 CAC (Cost per Acquisition) good or bad?
Without LTV: Can't tell. You know cost (₹1,000) but not value (how much customer generates).
With LTV: If LTV = ₹4,500, LTV/CAC = 4.5× (excellent). If LTV = ₹800, LTV/CAC = 0.8× (losing money).
What This Calculator Measures
1. Customer Lifetime Value (LTV):
LTV = Average Order Value × Purchase Frequency × Customer Lifespan × Gross Margin
Example:
AOV: ₹1,200
Frequency: 6 orders/year
Lifespan: 3 years
Margin: 30%
LTV = ₹1,200 × 6 × 3 × 0.30 = ₹6,480
2. LTV/CAC Ratio:
LTV/CAC = Customer Lifetime Value / Customer Acquisition Cost
If LTV = ₹6,480 and CAC = ₹1,500:
LTV/CAC = 4.3× (excellent — earning ₹4.30 for every ₹1 spent)
3. Payback Period:
Payback Period = CAC / (Annual Revenue per Customer × Margin)
Annual revenue = ₹1,200 × 6 = ₹7,200
Annual profit = ₹7,200 × 0.30 = ₹2,160
Payback = ₹1,500 / ₹2,160 = 0.69 years ≈ 8.3 months
When to Use This Calculator
Use Cases:
- Marketing budget planning: Determine max CAC for profitable acquisition
- Channel evaluation: Compare LTV across Google Ads, Facebook, Organic
- Pricing strategy: Model impact of price changes on LTV
- Retention optimization: Quantify value of reducing churn
- Investor pitch: Demonstrate unit economics (LTV/CAC ratio)
Example — E-commerce Startup:
Current situation:
AOV: ₹800
Frequency: 3 orders/year
Lifespan: 2 years
Margin: 25%
→ LTV = ₹1,200
CAC: ₹1,000
→ LTV/CAC = 1.2× (marginal, need improvement)
Strategy test with calculator:
Option A: Increase AOV to ₹1,000 (cross-sell) → LTV = ₹1,500 (LTV/CAC = 1.5×)
Option B: Increase frequency to 4 orders/year (loyalty) → LTV = ₹1,600 (LTV/CAC = 1.6×)
Option C: Increase lifespan to 3 years (reduce churn) → LTV = ₹1,800 (LTV/CAC = 1.8×)
Best strategy: Option C (reduce churn) — highest LTV impact
LTV Calculator
LTV Calculator
Calculator functionality coming soon...
How to Use This Calculator
Step 1: Enter Average Order Value (AOV)
- Revenue per transaction (before costs)
- Example: If customer spends ₹1,200 per order → AOV = ₹1,200
Step 2: Enter Purchase Frequency
- Orders per year (can use decimals)
- Example: 6 orders/year = 0.5 orders/month
Step 3: Enter Customer Lifespan
- Years customer stays active
- Example: Average customer stays 2.5 years
Step 4: Enter Gross Margin (%)
- Profit % after COGS (Cost of Goods Sold)
- Example: ₹1,000 revenue, ₹700 COGS → 30% margin
Step 5: Enter Customer Acquisition Cost (CAC) — Optional
- Total marketing spend / new customers acquired
- Example: ₹10 Lakh ads / 1,000 customers = ₹1,000 CAC
Step 6: Read Results
- LTV: Total profit per customer over lifespan
- LTV/CAC Ratio: ROI on customer acquisition
- Payback Period: Months to recover CAC
Interpreting Your Results
LTV/CAC Ratio Benchmarks
| Ratio | Status | Action | |-------|--------|--------| | < 1× | 🔴 Unsustainable | Losing money on every customer — fix immediately (reduce CAC or increase LTV) | | 1-2× | 🟡 Marginal | Barely profitable — optimize retention before scaling | | 3× | 🟢 Good | Industry standard — can scale acquisition | | 5×+ | ✅ Excellent | Strong unit economics — scale aggressively | | 10×+ | 🚀 Outstanding | Exceptional (rare) — unicorn-level metrics |
Payback Period Benchmarks
| Payback | Status | Implication | |---------|--------|-------------| | < 6 months | ✅ Excellent | Fast capital recovery — easy to finance growth | | 6-12 months | 🟢 Good | Industry standard for most businesses | | 12-18 months | 🟡 Acceptable | Manageable but tight cash flow | | > 18 months | 🔴 Risky | Long capital lockup — growth constrained |
Example:
If LTV = ₹6,000, CAC = ₹1,500, Annual Profit = ₹2,000:
Payback = ₹1,500 / ₹2,000 = 0.75 years = 9 months (Good)
Means: Takes 9 months of customer revenue to recover ₹1,500 acquisition cost
After 9 months, remaining 27 months are pure profit (₹4,500)
Industry-Specific Benchmarks
E-commerce:
LTV/CAC: 3-5×
Payback: 6-12 months
Typical LTV: ₹5,000-15,000 (fashion/electronics)
Typical CAC: ₹1,000-3,000
SaaS (B2B):
LTV/CAC: 3-5×
Payback: 12-18 months (longer sales cycle)
Typical LTV: $10,000-50,000 (3-5 year contracts)
Typical CAC: $3,000-10,000
Food Delivery:
LTV/CAC: 10-20× (high frequency)
Payback: 1-3 months (fast payback)
Typical LTV: ₹20,000-40,000 (2-3 years)
Typical CAC: ₹1,000-2,000
Subscription (OTT):
LTV/CAC: 4-6×
Payback: 6-12 months
Typical LTV: ₹5,000-8,000 (2-3 years at ₹200/month)
Typical CAC: ₹1,000-1,500
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