Free tools/Paid media
Customer lifetime value calculator
What a customer is worth, what you paid to get them, and the month you stop being out of pocket.
Share of customers who leave each month. 4% is roughly a 25-month average lifespan.
When a cohort pays you back
Each bar is the gross profit collected that month from one customer's cohort, shrinking as people churn. The line is the running total against what you paid to acquire them.
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How it works
Average lifespan = 1 divided by monthly churn. At 4% monthly churn the average customer stays 25 months.
LTV = monthly revenue times gross margin times lifespan. Using margin rather than raw revenue matters: a $90 subscription at a 75% margin contributes $67.50 a month, not $90.
CAC payback = CAC divided by monthly gross profit. It answers the question that governs your cash rather than your spreadsheet: how many months of this customer's payments go entirely to repaying what you spent to win them.
The chart makes the difference visible. Bars shrink because the cohort shrinks, so the running total flattens. If it never crosses the CAC line inside 24 months, this customer never pays you back.
Worked example
A subscription earns $90 a month at a 75% gross margin, with 4% monthly churn and a $450 CAC. Average lifespan is 1 divided by 0.04, or 25 months. Monthly gross profit is $67.50, so LTV is $67.50 times 25, or $1,687.50. Against a $450 CAC that is 3.75 to 1, and payback lands at $450 divided by $67.50, or 6.7 months.
Common questions
Should LTV use revenue or gross profit?
Gross profit. Revenue-based LTV flatters every business, and badly so for anyone with real cost of goods, which is why this applies your margin.
What LTV to CAC ratio should I aim for?
3 to 1 is the figure most subscription investors treat as a floor, but it is a rule of thumb rather than a law. Whether payback fits inside the runway you actually have matters more.
Why does payback period matter if LTV is high?
Because LTV arrives slowly and CAC is due now. A 24-month payback can starve a company holding 12 months of cash, however good the lifetime economics look.
How do I calculate monthly churn?
Customers lost during the month divided by customers at the start of it. Do not divide an annual figure by twelve: customers who leave in month one cannot leave again in month seven.
Does this work for e-commerce?
It works where purchases repeat on a rough cadence, treating revenue per month as average order value times orders per month. For one-off, high-consideration purchases, model lifetime value from repeat-purchase cohorts instead.
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