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LTV Calculator: Lifetime Value and LTV to CAC
Enter your average order value, how many orders a client places in a year, how many years they keep ordering and your gross margin. You get lifetime value as revenue and as profit, and with your acquisition cost (CAC) the LTV to CAC ratio and the order on which that cost pays back. Nothing you type leaves your browser.
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Work Out Lifetime Value and LTV to CAC
The form holds a worked example: an $80 average order, 3.2 orders a year for 2.5 years at a 45% gross margin, against a $95 acquisition cost. Replace it with your numbers; the results update as you type.
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The idea
What Lifetime Value Is, in Two Versions
Lifetime value (LTV) is what one client is worth over every order they place, not just the first. It comes in two versions. LTV revenue is average order value × orders per year × years they keep ordering: $80 × 3.2 × 2.5 = $640.00. LTV profit multiplies that by gross margin: $640.00 × 45% = $288.00.
Ad budgets use the profit version. Of the $640.00, $352.00 goes to the product, shipping, packaging, card fees and returns before any of it reaches you. A CAC target set from revenue would approve $200 per client and lose $200 on each one by the time the ads bill. Our Shopify profit margin calculator works the margin out from one order.
LTV also fixes a habit that flatters ROAS: counting repeat orders as if the ads earned them. The third order from a client who found you two years ago belongs to LTV, not to this month's campaign. Our ROAS vs ROI guide covers the split between new and returning revenue.
average order value × orders per year × years$80 × 3.2 × 2.5 = $640.00LTV revenue × gross margin$640.00 × 0.45 = $288.00LTV profit ÷ acquisition cost$288.00 ÷ $95.00 = 3.03 to 1CAC ÷ (average order value × margin), rounded up$95 ÷ $36 = 2.64, so order 3Your inputs
Where Each Input Comes From
Four numbers, all from the last 12 months of the same store. Mixing a two-year order count with a one-year client count is the most common way the result goes wrong.
Average order value
Total revenue ÷ orders, after discounts and before sales tax. Shopify Analytics shows it on the overview; a CRM or an order export gives the same figure. Use net of refunds if the report offers it.
Orders per year
Orders in the last 12 months ÷ the number of distinct people who placed them. A store with 9,600 orders from 3,000 people has 3.2. First-time-only stores sit near 1; subscriptions sit far higher.
Years a client keeps ordering
1 ÷ yearly churn. If 40% of last year's clients did not order again this year, the average span is 1 ÷ 0.4 = 2.5 years. A cohort report gives the same answer from the other side. With under a year of data, enter 1 and revisit it.
Gross margin
The share of an order left after the product, the shipping you pay, packaging, card fees and returns. Price minus product cost overstates it; the margin calculator takes every line off one order.
By years kept
LTV Profit by Years a Client Stays
Same $80 order, 3.2 orders a year and 45% margin against a $95 CAC. Only the years move.
| Years ordering | LTV revenue | LTV profit | LTV to CAC |
|---|---|---|---|
| 1 year | $256.00 | $115.20 | 1.21 to 1 |
| 2 years | $512.00 | $230.40 | 2.43 to 1 |
| 2.5 years (example) | $640.00 | $288.00 | 3.03 to 1 |
| 3 years | $768.00 | $345.60 | 3.64 to 1 |
| 5 years | $1,280.00 | $576.00 | 6.06 to 1 |
The first year alone returns $115.20 of profit on a $95 CAC, a 1.21 to 1 ratio that looks thin in the Google Ads account and is fine over the life of the client. Retention is the lever: each extra year adds $115.20 of profit per client without another dollar of ad spend. A ratio far above 3 to 1 is also a signal: the ads could pay more per client and still hold the line.
Ad decisions
What LTV Changes About What You Pay
Three numbers that follow from the $288.00, and where to take each of them next.
Allowable CAC
At 3 to 1, the most the ads may spend to win one client is LTV profit ÷ 3: $288.00 ÷ 3 = $96.00. The $95.00 in the example sits just inside it. A store that judged the ads on the first order alone, $36.00 of profit, would cap CAC at $12.00 and never run. The CAC and MER calculator shows what you pay today.
Highest CPC you can pay
Allowable CAC × conversion rate is the most a click may cost. At a 3% conversion rate, $96.00 × 0.03 = $2.88 per click for new clients, against $0.36 if the first order had to pay for itself. The CPC calculator works the click price out, and the budget calculator turns it into a monthly figure.
Payback and cash
CAC pays back on order 3, and at 3.2 orders a year that is about 11 months of cash out before the client turns a profit. Payback decides how fast you can scale: a store that recovers CAC on the first order can spend its returns straight back into ads; one that waits 11 months needs the cash to carry the gap.
Common mistakes
Where LTV Math Goes Wrong
Six habits that make lifetime value look bigger than the money that arrives.
- Revenue LTV used for a CAC target. $640.00 of revenue is $288.00 of profit. A target set from the larger number approves ads that lose money on every client.
- Years guessed instead of measured. Five years feels right and doubles the result. Take 1 ÷ churn from your own data, and use 1 year until you have the data.
- One average for every client. People who arrive through a 40% off code reorder less than people who paid full price. Work LTV out per channel or per first product when the counts allow it.
- Repeat orders credited to this month's ads. The repeat order belongs to LTV, and the ads get credit for the first order and the client it won. Counting both inflates ROAS and LTV at once.
- Margin taken as price minus product cost. Shipping, packaging, card fees and returns come off before the margin. On an $80 order they can be $12 or more.
- Payback ignored. A 3 to 1 ratio that takes 11 months to arrive needs cash to carry it. Check the payback order before scaling the budget.
What is the LTV formula?
LTV revenue is average order value × orders per year × years a client keeps ordering. LTV profit multiplies that by gross margin. In the worked example, $80 × 3.2 × 2.5 = $640.00 of revenue, and at a 45% margin $288.00 of profit. Ad budgets use the profit version, because that is the money available to pay for the ads.
What is a good LTV to CAC ratio?
3 to 1 is the common rule of thumb: three dollars of lifetime profit for every dollar spent to win a client. It is a convention, not a rule from Google or anyone else. The example lands at 3.03 to 1 ($288.00 ÷ $95.00). A ratio under 1 to 1 means the ads lose money on every new client; a ratio far above 3 to 1 can mean the ads are underspending and leaving growth behind.
Should I use revenue LTV or profit LTV?
Profit, for any decision about ad spend. Revenue LTV counts money that goes to the product, shipping and card fees before it reaches you. In the example the revenue figure ($640.00) is more than twice the profit figure ($288.00); a CAC target set from revenue would approve ads that lose money.
Where do I get orders per year and years?
Orders per year is orders in the last 12 months divided by the number of distinct people who placed them; Shopify Analytics and most CRMs give both counts. Years is how long the average client keeps ordering: 1 divided by the yearly churn rate, or the average active span in a cohort export. With under a year of data, use 1 year and update it later.
What is the payback period on CAC?
The number of orders it takes for the profit from one client to cover what was spent to win them: CAC ÷ profit per order, rounded up. In the example $95 ÷ $36 = 2.64, so the third order pays the cost back. At 3.2 orders a year that is about 11 months of cash tied up before the client turns a profit.
Does the calculator store my numbers?
No. The math runs in your browser, and nothing you type is sent to us or saved anywhere.
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Sources
Sources and Related Pages
- Shopify Help Center, Analytics: help.shopify.com/en/manual/reports-and-analytics/shopify-reports/overview-dashboard. The Analytics page shows key sales metrics for any date range, with a metric card for every available report. Read on October 25, 2026.
- Logical Gecko, ROAS vs ROI: Formulas, Examples and Which to Use.
- Logical Gecko, Free Google Ads audit.