This calculator works out what a customer is worth over time, and the most you can afford to pay to win one.
Healthy. You could pay up to $61.60 per customer and still hit 3:1.
Lifetime gross profit per customer: $185
Judging ads only on the first order can make good customers look expensive. Lifetime value counts every order a customer places while they stay, and the LTV to CAC ratio shows whether what you pay to get them makes sense.
Use it when you set ad budgets or decide how much a first order can cost you.
Every number this calculator uses, with an example.
The gross profit a customer brings in over the whole time they keep buying from you.
A customer who orders twice a year for two years at $42 profit per order is worth $168.
Your marketing spend on new customers divided by the new customers you won.
$9,000 spent to win 200 new customers is a $45 CAC.
LTV divided by CAC. 3:1 means a customer earns you three times what it cost to win them.
How many months of a customer’s gross profit it takes to cover what you paid to win them.
How often the average customer orders in a year: orders divided by customers over the last 12 months.
Your price minus product cost, divided by price, as a percent.
A $60 product that costs $24 has a 60 percent gross margin.
AOV × margin × orders per year is the gross profit one customer brings in each year.
Multiply by the years a customer stays. We use gross profit, not revenue, so the number is safe to spend against.
Divide lifetime value by your target ratio: LTV ÷ 3 at the common 3 to 1 rule of thumb.
In Shopify, divide orders in the last 12 months by the number of customers who ordered in that time.
Customer acquisition cost is your marketing spend on new customers divided by the new customers you won in the same period.
Revenue includes the cost of the product. Spending against revenue-based LTV is a common way to overpay for customers.
The growth plan does it from the outside, with no logins, and shows what we would fix first and what it would cost.