Customer Lifetime Value Calculator
Customer lifetime value from order value, purchase frequency, gross margin and lifespan or churn, with discounted CLV, CLV:CAC ratio and payback period.
Customer Lifetime Value Calculator: with the default inputs, customer lifetime value is $864.
Average order value, or the monthly subscription price for a SaaS.
12 for a monthly subscription.
Share of each purchase you keep after cost of goods or service delivery. Lifetime value should be counted in profit, not revenue.
How long a typical customer keeps buying.
Share of customers lost per year. 33% churn means an average 3-year lifespan; 5% monthly churn is about 46% annual.
Simple formula: annual gross profit per customer × lifespan.
- Discounted CLV
- $716Future years' profit discounted back to today at your discount rate.
- Gross profit per customer per year
- $288
- Revenue per customer per year
- $480
- Customer lifespan
- 3Years.
- CLV : CAC ratio
- 5.83:1 or better is the common benchmark; under 1 means you lose money on every customer.
- CAC payback period
- 6.3Months of gross profit needed to recover the acquisition cost.
- CLV net of acquisition cost
- $714
Assumptions
- Purchase value, frequency and margin are constant over the lifespan; no expansion or price increases.
- Discounted CLV treats each year's profit as arriving at year-end (ordinary annuity).
- CAC is fully expensed at acquisition.
| Year | Gross profit | Cumulative | Discounted | Cumulative net of CAC |
|---|---|---|---|---|
| 1 | $288 | $288 | $262 | $138 |
| 2 | $288 | $576 | $238 | $426 |
| 3 | $288 | $864 | $216 | $714 |
How this is worked out
The formula
Annual gross profit per customer = purchase value × purchases per year × gross margin Lifespan = 1 ÷ annual churn rate (if using churn) CLV (simple) = annual gross profit × lifespan CLV (discounted) = annual gross profit × [1 − (1 + d)^−lifespan] ÷ d CLV : CAC = CLV ÷ customer acquisition cost Payback (months) = CAC ÷ (annual gross profit ÷ 12)
Open How it’s calculated above to see this worked through with your own numbers.
What you enter
- Average purchase value
- Average order value, or the monthly subscription price for a SaaS.in dollars · 0 or more · defaults to 120
- Purchases per year
- 12 for a monthly subscription.0 or more · defaults to 4
- Gross margin
- Share of each purchase you keep after cost of goods or service delivery. Lifetime value should be counted in profit, not revenue.a percentage · from 0 to 100 · defaults to 60
- Customer lifespan from
- Choose one of 2 options.Average lifespan in years · Annual churn rate (lifespan = 1 ÷ churn)
- Average customer lifespan
- How long a typical customer keeps buying.from 0.01 to 100 · defaults to 3
- Annual churn rate
- Share of customers lost per year. 33% churn means an average 3-year lifespan; 5% monthly churn is about 46% annual.a percentage · from 0.01 to 100 · defaults to 33.3
- Customer acquisition cost(under More options)
- Total sales and marketing spend ÷ new customers won. Leave 0 to skip the ratio.in dollars · 0 or more · defaults to 150
- Annual discount rate(under More options)
- Cost of capital used to value future profit less than today's. 8–12% is common; 0 gives the simple undiscounted CLV.a percentage · from 0 to 100 · defaults to 10
What you get back
- Customer lifetime valuemain answer
- Simple formula: annual gross profit per customer × lifespan.
- Discounted CLV
- Future years' profit discounted back to today at your discount rate.
- Gross profit per customer per year
- Revenue per customer per year
- Customer lifespan
- Years.
- CLV : CAC ratio
- 3:1 or better is the common benchmark; under 1 means you lose money on every customer.
- CAC payback period
- Months of gross profit needed to recover the acquisition cost.
- CLV net of acquisition cost
What this assumes
- Purchase value, frequency and margin are constant over the lifespan; no expansion or price increases.
- Discounted CLV treats each year's profit as arriving at year-end (ordinary annuity).
- CAC is fully expensed at acquisition.
About this calculator
Customer lifetime value is the profit a typical customer brings in over the whole relationship. It's the number that tells you how much you can afford to spend to win a customer, which products are worth keeping, and whether growth is building a business or just buying revenue. This calculator uses the standard gross-margin formula, converts churn to lifespan if that's what you track, and adds the two figures operators actually compare it against: acquisition cost and payback.
The inputs
- Average purchase value × purchases per year is revenue per customer per year. For a subscription, use the monthly price and 12.
- Gross margin turns revenue into profit. Counting lifetime revenue as value is the most common way this number is inflated — a customer who pays $1,000 a year at 20% margin is worth $200 a year, not $1,000.
- Lifespan is how long the average customer stays. If you know churn instead, switch the selector: lifespan is 1 ÷ annual churn (33% churn → 3 years). Monthly churn converts to annual as 1 − (1 − m)^12; 5% monthly is about 46% a year.
- Customer acquisition cost (under More options) is total sales and marketing spend divided by new customers in the same period.
Simple vs. discounted
The simple formula multiplies annual profit by lifespan and treats a dollar in year five like a dollar today. The discounted version applies your cost of capital (8–12% for most businesses) so distant profit counts for less — it's the right figure for anything with a lifespan beyond a few years, and the one a finance team will expect. At a 3-year lifespan and 10% the difference is about 17%; at 10 years it's 40%.
Reading CLV against CAC
- CLV : CAC of 3:1 is the benchmark most investors and operators use for a healthy business. Under 1 you lose money on every customer; far above 5 may mean you're underinvesting in growth.
- Payback period is how many months of gross profit it takes to earn back the acquisition cost. Under 12 months is the usual target for subscription businesses; it's what determines how much cash growth burns.
- Net CLV is what a customer is worth after paying to acquire them.
Caveats
Averages hide a lot: a business whose value comes from 10% of customers should segment before acting on a blended CLV. Lifespan estimates from young companies are unreliable because no cohort has churned out yet — use cohort retention curves as soon as you have them. And CLV should be recalculated as pricing, margin and retention change; it's a moving target, not a constant.
Frequently asked questions
▸How do I calculate customer lifetime value?
Multiply average purchase value by purchases per year and by gross margin to get annual profit per customer, then multiply by the average lifespan in years. $120 × 4 × 60% × 3 years = $864.
▸How do I get lifespan from churn?
Lifespan = 1 ÷ annual churn rate. 25% annual churn means an average 4-year lifespan. Convert monthly churn to annual first: 1 − (1 − monthly)^12.
▸What is a good LTV to CAC ratio?
3:1 is the widely used benchmark — three dollars of lifetime gross profit for every dollar spent acquiring the customer. Below 1:1 the business loses money on growth; well above 5:1 often means it could grow faster.
▸Should CLV use revenue or profit?
Profit. Lifetime revenue overstates what a customer is worth by the cost of serving them. Use gross margin at minimum; some businesses also deduct retention and support costs per customer.
▸What discount rate should I use?
Your cost of capital — typically 8–12% for an established business, higher for a risky startup. The discount matters little for lifespans under two years and a great deal beyond five.
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