2,160 is the example result. This simplified LTV multiplies order value, purchase frequency, margin and lifespan. It does not discount future cash flows or model changing retention.
Estimate customer contribution from order value, purchase frequency, gross margin and expected years. The result assumes those inputs remain steady.
Separating growth, retention and subscription capacity
This simplified LTV multiplies order value, purchase frequency, margin and lifespan. It does not discount future cash flows or model changing retention. Recurring revenue should be compared across the same starting cohort. Expansion, contraction and churn change retention in different directions. Adding new customers to a retained-customer calculation can conceal losses in the original population.
What the model includes
Result = [Average order value] × [Orders per year] × ([Gross margin] ÷ 100) × [Expected customer years] Match the unit of the plan: users, seats, subscriptions and revenue are not interchangeable. A purchased seat can remain unused even when the invoice is fully paid. Annual prepayment also changes cash timing without changing monthly recurring value. Read the result beside the renewal schedule and account concentration. A short measurement window may miss seasonal usage or contracts that have not yet reached their renewal date.
Example with the supplied inputs
Average order value: 300; Orders per year: 4; Gross margin: 60; Expected customer years: 3. Result: 2,160. The values are illustrative.
Compare one changed input
Average order value changes from 300 to 330. The result becomes 2,376. All other inputs remain fixed.
Calculation rule
Result = [Average order value] × [Orders per year] × ([Gross margin] ÷ 100) × [Expected customer years]
Inputs and output
| Input | Example value | Entry convention |
|---|---|---|
| Average order value | 300 | Use the source quantity represented by average order value. Keep the counted population fixed and avoid mixing a unit value with a period total. |
| Orders per year | 4 | Use the source quantity represented by orders per year. Keep the counted population fixed and avoid mixing a unit value with a period total. |
| Gross margin | 60 | Enter gross margin on the percentage scale used in the formula (20 means 20%, not 0.20). Keep its base and reporting period consistent with the other inputs. |
| Expected customer years | 3 | Use the duration unit stated in expected customer years. A time period is not interchangeable with a currency amount or a count of events. |
Output: 2,160 is the example result. This simplified LTV multiplies order value, purchase frequency, margin and lifespan. It does not discount future cash flows or model changing retention. Use the formula to distinguish a cash amount, count, percentage or ratio.
How to use the page
Collect the inputs
Gather Average order value, Orders per year, Gross margin. Use one period and the units shown in the form.
Run the calculation
Enter the values and select the action. The calculation rule above explains how the inputs produce the result.
Compare a scenario
Change Average order value on its own, keeping the other inputs fixed. Read both results before changing another assumption.
Worked example
With the example inputs listed above, the result is 2,160.
Change Average order value from 300 to 330 while keeping every other value fixed. The result becomes 2,376. This comparison isolates that input; it does not forecast how other variables will respond.
Check the stated formula, units and limits before using the result in a decision.
Keep the displayed formula, input units and model scope with the result. Corrections or questions can be sent through the request section on this page.
Content updated: October 11, 2026