Media Puppies
Customer lifetime value calculator
LTV on revenue flatters you. This calculates it on gross profit, which is the only version that tells you what you can afford to spend.
Set from your location. The maths is the same in any currency — only the labels change.
What is left after cost of goods and fulfilment.
Total marketing spend ÷ new customers.
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Revenue LTV versus profit LTV
Most LTV figures quoted in meetings are lifetime revenue, which is a vanity number. A customer who spends ₹12,000 over two years at a 20% margin is worth ₹2,400 to you, not ₹12,000. Spend against the second figure.
The 3:1 benchmark, and when to ignore it
LTV to CAC of 3:1 is a widely used rule of thumb: a third of the lifetime gross profit goes to acquiring the customer, and the rest covers overheads and profit. It is a guide, not physics.
- Below 1:1 — you lose money on every customer. No volume fixes this.
- 1:1 to 3:1 — viable but fragile. One bad month or a rise in CPMs erases the margin.
- 3:1 to 5:1 — the healthy band for most businesses.
- Above 5:1 — usually means you are under-spending. A competitor willing to run at 3:1 can outbid you on every impression.
Payback period matters as much as the ratio
A 6:1 ratio is no comfort if it takes eighteen months to recover the acquisition cost and you are funding that gap from working capital. The orders-to-payback figure above tells you how many purchases it takes to get your money back. For a cash-constrained business, getting that to one order matters more than a beautiful lifetime ratio.
Being honest about lifespan
Most businesses overestimate this badly. If you have been trading for eighteen months, you cannot claim a three-year customer lifespan — you have no evidence. Use the period you can actually observe, and revise it upward when the data earns it.
Questions
Should LTV use gross or net margin?+
Gross margin — revenue minus the variable costs of delivering the product. Net margin already subtracts marketing, which would double-count.
How do I calculate CAC?+
Total sales and marketing spend for a period divided by the number of new customers acquired in it. Include agency fees and tools, not just ad spend.
What if repeat purchase rate is unknown?+
Assume one purchase and treat anything beyond it as upside. A model built on a guessed repeat rate produces a confident wrong answer.
Does this work for services?+
Yes. Use average contract value as order value and renewals per year as frequency.
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