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 lifetime contribution from average order value, yearly orders, margin and customer years. Use contribution rather than lifetime revenue in acquisition comparisons.
Comparing financial amounts on a defined basis
This simplified LTV multiplies order value, purchase frequency, margin and lifespan. It does not discount future cash flows or model changing retention. A financial model is useful when its cash amounts, rate convention and time horizon describe the same case. Interest, return and purchasing power are different outputs. A projection should remain separate from an observed or audited balance.
What the model includes
Result = [Average order value] × [Orders per year] × ([Gross margin] ÷ 100) × [Expected customer years] Check whether a rate is annual, monthly, simple or compounded. Enter fees only where the form represents them and identify contractual charges that remain outside the estimate. A monthly payment alone does not establish affordability or total ownership cost. Use the result to prepare the next question about terms or assumptions. Tax treatment, lender conditions and valuation evidence require the relevant source documents; they cannot be recovered from a few numeric inputs.
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