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Estimate how much profit an average customer generates over their relationship with you. LTV sets the ceiling on what you can afford to spend acquiring them.
Optional — switches LTV from revenue to profit.
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LTV = Average order value × Purchases per year × Lifespan (× margin)Multiply how much a customer spends per order by how often they buy and how many years they stay. Apply your gross margin to convert revenue LTV into profit LTV.
LTV is the single most useful number for setting ad budgets — it tells you the most you can afford to pay to acquire a customer.
A common safe target is to keep CAC at or below one-third of LTV, leaving margin for overhead and profit.
We help brands raise retention and AOV so you can outspend competitors to acquire customers.