LTV vs 60-day LTGP — why projected value is killing your cash flow

LTV — Lifetime Value — is one of the most cited metrics in ecommerce. It’s also one of the most dangerous.

Not because it’s wrong in theory. The concept is sound: a customer is worth more than their first order. The problem is how brands use it. They project LTV out 12–24 months, use that inflated number to justify higher CACs today, and then wonder why they’re running out of cash despite “profitable” unit economics.

The fix is LTGP — Lifetime Gross Profit — measured over a fixed, short window. And the window that matters most for cash flow decisions is 60 days.

What’s wrong with LTV?

Traditional LTV is calculated as average order value × purchase frequency × customer lifespan. The result is a big, optimistic number. “Our LTV is $240.”

Three problems with this:

1. It’s a revenue figure, not a profit figure. A customer with $240 LTV and 55% CM2 generates $132 in actual margin. Citing $240 to justify a $120 CAC sounds reasonable until you realise you’re only keeping $132 — and that’s over the customer’s entire lifetime, not in the first month.

2. It’s projected, not realised. LTV models assume future behaviour based on historical cohorts. But customers churn. Repeat purchase rates decline. Product-market dynamics shift. The $240 LTV you calculated from 2023 cohort data may not materialise for 2026 customers.

3. It ignores the time value of money. Even if a customer does generate $240 over 18 months, you’re paying the CAC on day one. The cash goes out immediately. The LTV trickles back over a year and a half. If you’re funding growth from cash flow (not venture capital), this timing gap can kill you.

What is LTGP?

LTGP = Total Gross Profit from a Customer Over a Fixed Period

Instead of projecting lifetime revenue, LTGP measures actual gross profit (revenue minus COGS minus variable costs) generated by a customer cohort within a specific timeframe.

We use 60-day LTGP as the default because it’s long enough to capture first-repeat behaviour but short enough to keep decisions grounded in cash reality.

How to calculate 60-day LTGP

1. Take a cohort of customers from 60+ days ago. For example, everyone who made their first purchase in February.

2. Sum all their purchases within 60 days of their first order. Include first purchase + any repeat purchases within that window.

3. Calculate gross profit on those orders. Revenue minus COGS minus variable costs (shipping, processing, pick & pack). This is CM2-level margin.

4. Divide by the number of customers in the cohort. This gives you 60-day LTGP per customer.

Example

February cohort: 200 new customers.

• First purchase revenue: $16,000 (avg AOV $80)

• Repeat purchases within 60 days: 40 orders totalling $3,600

• Total revenue: $19,600

• CM2 margin: 54% = $10,584 gross profit

• 60-day LTGP per customer: $10,584 ÷ 200 = $52.92

Compare that to a projected LTV of $240. The 60-day number is what you can actually bank on for cash flow planning. The $240 is a hope.

Why 60 days?

The window isn’t arbitrary:

• Most ecom repeat purchases happen within 30–60 days of the first order. If a customer is going to buy again, the majority do so quickly — especially in consumables, supplements, beauty, and food.

• Cash conversion cycle alignment. For most DTC brands, 60 days is roughly how long it takes for cash from a customer to cycle through inventory restocking. Your LTGP window should match your cash cycle.

• It’s conservative enough to be trustworthy. 60-day LTGP uses real data, not projections. You don’t need to model churn rates or assume future behaviour.

For some categories (fashion, homeware), a 90-day window might be more appropriate. For consumables with subscription models, 30 days might suffice. The point is: pick a window, measure actual profit, and use that to set CAC targets.

How 60-day LTGP changes your CAC targets

If your 60-day LTGP is $52.92, that’s the maximum you can spend acquiring a customer and still break even within 60 days.

Compare this to the LTV approach: a founder using $240 LTV might set a CAC target of $80 (“that’s only a 3:1 LTV:CAC ratio!”). But $80 CAC against $52.92 of realised 60-day gross profit means you’re $27 underwater per customer for at least two months. Scale that to 200 customers a month and you’re burning $5,400/month in cash before those customers (maybe) pay back.

For venture-backed brands with a war chest, this might be acceptable. For bootstrapped or cash-flow-funded brands, it’s how you go broke while looking profitable on paper.

LTV still has a place

LTV isn’t useless — it’s just misused. It’s good for:

• Long-term strategic planning. Understanding how valuable different customer segments are over time.

• Retention investment decisions. Deciding how much to spend on email, loyalty, and winback programmes.

• Investor conversations. Showing the compounding value of your customer base.

It’s bad for:

• Setting CAC targets. Use 60-day LTGP instead.

• Cash flow planning. You can’t spend projected future value today.

• Scaling decisions. Marginal decisions need marginal data, not averages.

The bottom line

LTV tells you what a customer might be worth someday. 60-day LTGP tells you what a customer is actually worth right now. One is a forecast. The other is a bank statement. Build your growth model on the bank statement.