Customer Lifetime Value (LTV) Calculator
Work out what a customer is worth in AED, your LTV:CAC ratio, and the most you can afford to spend acquiring one.
Estimate only. LTV models the average customer; real customers vary widely. Profit-based LTV (with margin applied) is the fairer figure to compare against CAC. Ratios shown are common industry guidelines, not guarantees. Not financial advice.
How LTV is calculated here
| Mode | Formula |
|---|---|
| Simple | AOV × purchases/year × lifespan (years) × margin* |
| Churn-based | AOV × purchases/year × (1 ÷ monthly churn ÷ 12) × margin* |
| LTV:CAC | LTV ÷ CAC |
| Max affordable CAC | LTV ÷ target ratio |
*Margin is only applied when the “profit-based LTV” toggle is on; otherwise LTV is revenue-based. Comparing a revenue LTV against CAC flatters the numbers, so for acquisition decisions the profit-based figure is the one to trust.
Frequently Asked Questions
What is customer lifetime value (LTV)?
Customer lifetime value is the total amount a typical customer is worth to your business across the whole time they stay a customer \u2014 not just their first purchase. In its simplest form it is the average order value multiplied by how often they buy per year and how many years they stay. If you apply your gross margin, you get profit-based LTV, which is the more meaningful figure because it reflects what you actually keep.
What is a good LTV:CAC ratio?
The widely-used benchmark is around 3:1 \u2014 meaning a customer is worth about three times what it costs to acquire them. Below 1:1 you are losing money on every customer. Between 1:1 and 3:1 the business works but margins for growth are thin. Much above 5:1 can actually signal that you are under-investing in marketing and could afford to spend more to grow faster. These are guidelines, not rules \u2014 the right ratio depends on your margins, growth stage and how long CAC takes to pay back.
Should I use revenue or profit for LTV?
Profit-based LTV (revenue multiplied by your gross margin) is the more honest number, because comparing a revenue-based LTV against CAC overstates how much room you really have. A customer who generates AED 1,000 in revenue at a 30% margin is only worth AED 300 in gross profit \u2014 so use the margin toggle in this calculator and compare that AED 300 against your acquisition cost, not the AED 1,000.
How does churn relate to lifetime value?
For subscription or repeat-purchase businesses, customer lifespan is driven by churn: if you lose 5% of customers each month, the average customer stays about 1 \u00f7 0.05 = 20 months. A lower churn rate means a longer lifespan and a higher LTV, which is why retention improvements often lift LTV faster than acquiring more customers. The churn mode in this calculator derives lifespan from your monthly churn rate automatically.
What is maximum affordable CAC?
It is the most you can spend to acquire a customer while still hitting your target LTV:CAC ratio. If your profit-based LTV is AED 900 and you want a healthy 3:1 ratio, your maximum affordable CAC is AED 300. Knowing this number sets a ceiling for your ad bids and cost-per-lead so campaigns stay profitable \u2014 the calculator shows it for the target ratio you choose.