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Customer lifetime value calculator (LTV)

What a customer is worth to you over the whole relationship, in revenue and in gross profit, with every step shown.

Customer lifetime value calculator

How do your customers buy?

Repeat purchases: shops and services sold order by order. Subscription: recurring revenue and churn.

The average amount of one order, before VAT.

£

For example 4 for one order a quarter.

How long a customer keeps buying from you, on average: for example 2.5.

Optional. Leave it blank for a value in revenue.

%
Margin worked out on

A 50% mark-up on cost is a 33.33% margin on the selling price.

Optional. Sales and marketing spend divided by the number of new customers.

£

Customer lifetime value (LTV)

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Enter your figures to see the customer lifetime value.

Revenue over the customer lifetime
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Average customer lifetime, in months
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Recent calculations

Nothing yet: copy, export or save a calculation to find it here.

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How it works

Customer lifetime value, or LTV, estimates what a customer brings in from their first order to their last. Pick your model: repeat purchases (average order value, orders a year and how long customers stay) or subscription (revenue per period and churn). Add your gross margin to turn revenue into gross profit, and your cost to acquire a customer to see how many months a new customer takes to pay back. All amounts are before VAT and rounded to the nearest penny.

Choose the right model

For a shop or services sold order by order, choose ‘Repeat purchases’ and enter the average order value before VAT, the number of orders per customer per year and how many years a customer keeps buying. For a subscription, choose ‘Subscription’, the period (monthly or yearly), the average revenue per customer for that period and the churn rate for the same period.

Enter the margin on the selling price

Lifetime value uses gross profit as a percentage of the selling price, which HMRC calls the gross profit rate. If you know your mark-up on cost instead, choose ‘On cost’ and the calculator converts it: a 50% mark-up is a 33.33% margin. Leave the margin blank and the result stays in revenue.

Compare it with the acquisition cost

Your customer acquisition cost (CAC) is what you spend on sales and marketing to win one customer. Enter it with your gross margin to get the LTV:CAC ratio, the value left after the acquisition cost and the number of months of gross profit it takes to pay that cost back. Copy the workings, export them as CSV or save them to Priostack.

Repeat purchases: lifetime revenue = average order value × orders a year × years.

Subscription: average lifetime = 1 ÷ churn, in periods, so lifetime revenue = revenue per period ÷ churn.

Lifetime value = lifetime revenue × gross margin on price. A mark-up M on cost becomes M ÷ (100 + M).

LTV:CAC = lifetime value ÷ CAC; payback = CAC ÷ monthly gross profit per customer.

Each amount is rounded once, to the nearest penny, with halves rounded up.

Example: a £25-a-month subscription

A service billed at £25.00 a month before VAT loses 2.5% of its subscribers each month. A customer stays 1 ÷ 2.5% = 40 months on average and brings in £25.00 ÷ 2.5% = £1,000.00 of revenue. At an 80% gross margin, their lifetime value is £800.00. If winning them costs £400.00, the LTV:CAC ratio is 2 and the cost is paid back in £400.00 ÷ £20.00 = 20 months of gross profit.

Frequently asked questions

How do you calculate customer lifetime value?

Multiply what a customer brings in each period by the number of periods they stay, then by your gross margin. A customer who orders £50.00 before VAT six times a year for three years, at a 60% margin, is worth £50.00 × 6 × 3 × 60% = £540.00.

What is the difference between margin and mark-up?

Margin is gross profit as a share of the selling price; mark-up is the same profit as a share of cost. HMRC’s manuals call the first the gross profit rate and the second the rate of mark-up. Goods bought for £60 and sold for £100 make a 40% margin but a 66.67% mark-up. Lifetime value needs the margin: using the mark-up would overstate it.

How do I turn a churn rate into a customer lifetime?

If a steady share c of your customers leaves each period, a customer stays 1 ÷ c periods on average: 25 months at 4% monthly churn, 5 years at 20% yearly churn. Revenue and churn must cover the same period, which is why the calculator asks for both monthly or both yearly.

Should I include VAT?

No. UK company law measures turnover after deducting VAT (Companies Act 2006, section 474). Enter order values, revenue and acquisition costs before VAT, and a margin worked out on prices before VAT.

What is a good LTV:CAC ratio?

There is no official threshold. The arithmetic says one thing for certain: below 1, each new customer costs more than the gross profit they bring in. Above that, weigh the ratio and the payback period against your cash: an acquisition cost paid back over 30 months ties up far more cash than one paid back in 6.

Why is the result not discounted?

This calculator adds up future gross profit without discounting it, so £1 earned in three years counts the same as £1 today. Over a lifetime of several years the present value is lower, so read the result as a ceiling.

Sources

  1. HMRC Enquiry Manual EM3082: gross profit rate (11 November 2026)
  2. HMRC Enquiry Manual EM3504: gross profit rate and rate of mark-up (11 November 2026)
  3. HMRC Enquiry Manual EM3503: turning a mark-up into a gross profit rate (11 November 2026)
  4. legislation.gov.uk: Companies Act 2006, section 474 (turnover is after VAT is deducted) (11 November 2026)

This calculator gives general information, not legal, tax, financial or accounting advice. Lifetime value is an estimate that depends on your assumptions: check them against your own figures.

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