Customer economics metric

LTV (customer lifetime value)

What an average customer from a given cohort brings in over a fixed window after their first order. An LTV only means something when you say which window, whether it's revenue or margin, and which customers it covers.

Source: Shopify orders + cost inputsComputed: Per acquisition cohort, monthlyBetter when: HigherAlso called: CLV, CLTV, customer value
Formula
LTV (N days) =
Cohort revenue or CM1 in first N days
÷ Customers in the cohort

Always label it: "180-day CM1 LTV" is a number you can use. "LTV" on its own isn't.

Updated November 2026 · 7 min read
01

What is LTV?

LTV answers a simple question: once someone becomes a customer, how much are they worth to you? The answer decides how much you can afford to pay to acquire them, which is why it sits behind almost every scaling decision.

The trouble is that "lifetime" is never actually a lifetime. Every LTV is measured over some window, on some basis, for some group of customers. Change any of the three and the number moves a lot. The same brand can honestly quote an LTV of ₹2,400 or ₹593, depending on those choices.

The window90, 180 or 365 days after the first order. Longer windows look bigger and take longer to know.
The basisRevenue, or CM1 (net revenue minus fulfilment). Only margin can be compared to what you spent to acquire. Use CM1, not CM2: CM2 already takes ad spend out, so comparing it with CAC would count acquisition cost twice.
The cohortWhich customers: by acquisition month, channel, or first product bought.
02

How it's calculated

Take every customer whose first order fell in a period. Add up everything they spent, or everything you kept after variable costs, within N days of their first order. Divide by how many of them there are.

InputSource and rangeWhat it gives us
first_order_dateEach customer's earliest delivered orderWhich cohort they belong to, and when their clock starts
net_revenueDelivered orders within N days, after discounts and GSTRevenue LTV
cm1Net revenue minus COGS, shipping (incl. RTO legs), payment gateway fees and handlingCM1 LTV, the one to compare with CAC
cohort_sizeCustomers whose first delivered order fell in the periodDenominator
Revenue LTVCohort net revenue (N days) ÷ Cohort sizeGood for demand and retention trends.
CM1 LTVCohort CM1 (N days) ÷ Cohort sizeWhat you can actually spend to acquire.
Why margin, not revenue?Acquisition cost is paid in rupees you keep, not rupees you bill. A customer who spends ₹2,400 with you at a 38% contribution margin leaves ₹912 to cover the cost of winning them. Comparing revenue LTV with CAC overstates how much you can spend by more than double in that case.
03

Tracking it as cohort curves

A single LTV number hides whether newer customers are better or worse than older ones. Track each acquisition cohort as a curve instead, and compare cohorts at the same age.

  1. 1Group by first orderOne cohort per acquisition month. Optionally split by channel or first product.
  2. 2Accumulate monthlyEach month, add the cohort's revenue and CM1 to its running total per customer.
  3. 3Align by agePlot months since first order, not calendar months, so cohorts line up.
  4. 4Compare at the same ageIs the August cohort's 90-day LTV above or below May's 90-day LTV?
The age trapAveraging LTV across all customers mixes old cohorts, which have had a year to reorder, with new ones that have had a month. When you're acquiring fast, the average drops even if every cohort is performing just as well as before.
04

Worked examples

Example 1: One cohort, three honest LTVs

An illustrative January 2026 cohort of 5,000 customers. Average first order ₹1,200, with a 38% CM1 margin assumed throughout.

Window after first orderRevenue LTVCM1 LTV
First order only₹1,200₹456
30 days₹1,320₹502
60 days₹1,450₹551
90 days₹1,560₹593
180 days₹1,860₹707
270 days₹2,150₹817
365 days₹2,400₹912
Cumulative value per customer, January cohortCM1 keptVariable costs
1st orderMonth 1Month 2Month 3Month 6Month 9Month 12
Bar height is revenue per customer. The Indigo part is the CM1 you keep.
  • ₹2,400365-day revenue LTV. The number that ends up in pitch decks.
  • ₹1,56090-day revenue LTV. Faster to measure, still revenue.
  • ₹59390-day CM1 LTV. Four times smaller than the first, and the honest ceiling on what you can pay to acquire this customer if you want your money back within a quarter.

Example 2: The first product shapes the customer

Same brand, customers split by what they bought first. Illustrative 180-day numbers at a 38% CM1 margin.

First bought: 60-day packHigh value
First order₹1,800
180-day CM1 LTV₹988
₹2,600 revenue per customer in 180 days. More expensive to acquire, but each customer leaves room to pay for it.
First bought: trial mini packCheck CAC
First order₹399
180-day CM1 LTV₹418
₹1,100 revenue per customer in 180 days. Cheap to acquire, but if CAC on trial-pack ads is above ₹418, every one of these customers loses money within six months.
05

Using LTV to decide

Compare cohorts at the same age, and compare CM1 LTV with new customer CAC from the same cohort. Treat these as starting rules.

Healthy
You seeNewer cohorts track at or above older ones at the same age.
Do thisYou can afford a higher CAC. Scale the channels and products bringing these customers in.
Watch
You seeRecent cohorts below older ones at the same age.
Do thisSplit by channel, first product and first-order discount to find which new customers are weaker.
Act now
You seeCM1 LTV over your payback window is below new customer CAC.
Do thisCut spend on the segments where this holds, or lift margin and repeat rate before scaling again.
Too early
You seeA cohort younger than the window you're judging.
Do thisCompare its curve so far with older cohorts at the same age, and wait before calling it.
06

Common mistakes

  • Quoting LTV without a windowAlways say 90, 180 or 365 days. Without it, nobody can check or compare the number.
  • Comparing revenue LTV to CACCAC is paid out of margin. Use CM1 LTV for any spend decision.
  • Counting RTO ordersUndelivered COD orders aren't revenue. Build LTV from delivered orders only.
  • Averaging across all customersMixes old and new cohorts. Compare cohorts at the same age instead.
  • Projecting too farA 3-year LTV built from 6 months of data is a forecast. Label it as one.
07

Frequently asked questions

Should LTV use revenue or margin?

Use CM1 for anything involving spend: CAC targets, LTV:CAC, payback. Revenue LTV is fine for tracking whether customers are reordering more or less over time.

Which window should I use?

The one that matches how long you can wait to get your acquisition spend back. Many brands use 90 or 180 days for decisions and keep 365 days for planning.

Does LTV include the first order?

Usually yes, and it should, because the first order's margin is part of what pays back CAC. If you report repeat-only LTV, label it clearly.

Why does my LTV differ between tools?

Different windows, revenue vs margin, whether RTO and cancellations are removed, and how customers are matched across phone and email. Line those up and the numbers usually agree.

See LTV by cohort, channel and first product

BooleanMaths builds cohort LTV from delivered orders and your real costs, so you can compare revenue and CM1 LTV at any window.

Book a demoBrowse all guides
Customer economics metric

LTV (customer lifetime value)

What an average customer from a given cohort brings in over a fixed window after their first order. An LTV only means something when you say which window, whether it's revenue or margin, and which customers it covers.

Source: Shopify orders + cost inputsComputed: Per acquisition cohort, monthlyBetter when: HigherAlso called: CLV, CLTV, customer value
Formula
LTV (N days) =
Cohort revenue or CM1 in first N days
÷ Customers in the cohort

Always label it: "180-day CM1 LTV" is a number you can use. "LTV" on its own isn't.

Updated November 2026 · 7 min read
01

What is LTV?

LTV answers a simple question: once someone becomes a customer, how much are they worth to you? The answer decides how much you can afford to pay to acquire them, which is why it sits behind almost every scaling decision.

The trouble is that "lifetime" is never actually a lifetime. Every LTV is measured over some window, on some basis, for some group of customers. Change any of the three and the number moves a lot. The same brand can honestly quote an LTV of ₹2,400 or ₹593, depending on those choices.

The window90, 180 or 365 days after the first order. Longer windows look bigger and take longer to know.
The basisRevenue, or CM1 (net revenue minus fulfilment). Only margin can be compared to what you spent to acquire. Use CM1, not CM2: CM2 already takes ad spend out, so comparing it with CAC would count acquisition cost twice.
The cohortWhich customers: by acquisition month, channel, or first product bought.
02

How it's calculated

Take every customer whose first order fell in a period. Add up everything they spent, or everything you kept after variable costs, within N days of their first order. Divide by how many of them there are.

InputSource and rangeWhat it gives us
first_order_dateEach customer's earliest delivered orderWhich cohort they belong to, and when their clock starts
net_revenueDelivered orders within N days, after discounts and GSTRevenue LTV
cm1Net revenue minus COGS, shipping (incl. RTO legs), payment gateway fees and handlingCM1 LTV, the one to compare with CAC
cohort_sizeCustomers whose first delivered order fell in the periodDenominator
Revenue LTVCohort net revenue (N days) ÷ Cohort sizeGood for demand and retention trends.
CM1 LTVCohort CM1 (N days) ÷ Cohort sizeWhat you can actually spend to acquire.
Why margin, not revenue?Acquisition cost is paid in rupees you keep, not rupees you bill. A customer who spends ₹2,400 with you at a 38% contribution margin leaves ₹912 to cover the cost of winning them. Comparing revenue LTV with CAC overstates how much you can spend by more than double in that case.
03

Tracking it as cohort curves

A single LTV number hides whether newer customers are better or worse than older ones. Track each acquisition cohort as a curve instead, and compare cohorts at the same age.

  1. 1Group by first orderOne cohort per acquisition month. Optionally split by channel or first product.
  2. 2Accumulate monthlyEach month, add the cohort's revenue and CM1 to its running total per customer.
  3. 3Align by agePlot months since first order, not calendar months, so cohorts line up.
  4. 4Compare at the same ageIs the August cohort's 90-day LTV above or below May's 90-day LTV?
The age trapAveraging LTV across all customers mixes old cohorts, which have had a year to reorder, with new ones that have had a month. When you're acquiring fast, the average drops even if every cohort is performing just as well as before.
04

Worked examples

Example 1: One cohort, three honest LTVs

An illustrative January 2026 cohort of 5,000 customers. Average first order ₹1,200, with a 38% CM1 margin assumed throughout.

Window after first orderRevenue LTVCM1 LTV
First order only₹1,200₹456
30 days₹1,320₹502
60 days₹1,450₹551
90 days₹1,560₹593
180 days₹1,860₹707
270 days₹2,150₹817
365 days₹2,400₹912
Cumulative value per customer, January cohortCM1 keptVariable costs
1st orderMonth 1Month 2Month 3Month 6Month 9Month 12
Bar height is revenue per customer. The Indigo part is the CM1 you keep.
  • ₹2,400365-day revenue LTV. The number that ends up in pitch decks.
  • ₹1,56090-day revenue LTV. Faster to measure, still revenue.
  • ₹59390-day CM1 LTV. Four times smaller than the first, and the honest ceiling on what you can pay to acquire this customer if you want your money back within a quarter.

Example 2: The first product shapes the customer

Same brand, customers split by what they bought first. Illustrative 180-day numbers at a 38% CM1 margin.

First bought: 60-day packHigh value
First order₹1,800
180-day CM1 LTV₹988
₹2,600 revenue per customer in 180 days. More expensive to acquire, but each customer leaves room to pay for it.
First bought: trial mini packCheck CAC
First order₹399
180-day CM1 LTV₹418
₹1,100 revenue per customer in 180 days. Cheap to acquire, but if CAC on trial-pack ads is above ₹418, every one of these customers loses money within six months.
05

Using LTV to decide

Compare cohorts at the same age, and compare CM1 LTV with new customer CAC from the same cohort. Treat these as starting rules.

Healthy
You seeNewer cohorts track at or above older ones at the same age.
Do thisYou can afford a higher CAC. Scale the channels and products bringing these customers in.
Watch
You seeRecent cohorts below older ones at the same age.
Do thisSplit by channel, first product and first-order discount to find which new customers are weaker.
Act now
You seeCM1 LTV over your payback window is below new customer CAC.
Do thisCut spend on the segments where this holds, or lift margin and repeat rate before scaling again.
Too early
You seeA cohort younger than the window you're judging.
Do thisCompare its curve so far with older cohorts at the same age, and wait before calling it.
06

Common mistakes

  • Quoting LTV without a windowAlways say 90, 180 or 365 days. Without it, nobody can check or compare the number.
  • Comparing revenue LTV to CACCAC is paid out of margin. Use CM1 LTV for any spend decision.
  • Counting RTO ordersUndelivered COD orders aren't revenue. Build LTV from delivered orders only.
  • Averaging across all customersMixes old and new cohorts. Compare cohorts at the same age instead.
  • Projecting too farA 3-year LTV built from 6 months of data is a forecast. Label it as one.
07

Frequently asked questions

Should LTV use revenue or margin?

Use CM1 for anything involving spend: CAC targets, LTV:CAC, payback. Revenue LTV is fine for tracking whether customers are reordering more or less over time.

Which window should I use?

The one that matches how long you can wait to get your acquisition spend back. Many brands use 90 or 180 days for decisions and keep 365 days for planning.

Does LTV include the first order?

Usually yes, and it should, because the first order's margin is part of what pays back CAC. If you report repeat-only LTV, label it clearly.

Why does my LTV differ between tools?

Different windows, revenue vs margin, whether RTO and cancellations are removed, and how customers are matched across phone and email. Line those up and the numbers usually agree.

See LTV by cohort, channel and first product

BooleanMaths builds cohort LTV from delivered orders and your real costs, so you can compare revenue and CM1 LTV at any window.

Book a demoBrowse all guides