What This Calculator Measures
This calculator estimates Customer Lifetime Value (LTV) — the total discounted revenue an average customer is expected to generate over their relationship with your business — from four inputs: average order value (AOV), how often a customer purchases per year, the percentage of customers retained year over year, and a discount rate that accounts for the time value of money.
It uses an annual retention model, not a month-by-month cohort curve. Each year, the customer either stays (at the retention rate you entered) or churns; the calculator projects that pattern out for 10 years and discounts each year's expected revenue back to today's dollars. This makes it a fast, transparent estimate that works well for e-commerce, retail, and any repeat-purchase business where you know (or can estimate) an annual retention rate — as opposed to SaaS businesses with detailed month-by-month cohort data, which are better served by the SaaS cohort LTV calculator described further down.