Customer Lifetime Value Calculator
Customer lifetime value (CLV, also called LTV) estimates the total profit a business can expect from one customer over the whole relationship.
Enter Values
How to use this calculator
- Enter the average purchase value, how many times a customer buys per year, and how many years they stay a customer.
- Optionally add your gross margin so the result reflects profit rather than revenue (leave blank to assume 100%).
- Optionally add your customer acquisition cost (CAC) to see net CLV and the CLV : CAC ratio.
How it works
Customer lifetime value (CLV, also called LTV) estimates the total profit a business can expect from one customer over the whole relationship. The core formula is CLV = average purchase value × purchases per year × customer lifespan × gross margin. The first three terms give lifetime revenue; multiplying by gross margin converts that revenue into the profit the business actually keeps.
When you supply a customer acquisition cost (CAC), the tool also reports net CLV (CLV minus CAC) and the CLV : CAC ratio. That ratio is a widely used health check: a value around 3 : 1 or higher usually signals sustainable unit economics, while a ratio near or below 1 : 1 means you are spending as much to win a customer as they are worth. All figures are a single-currency, steady-state estimate — they assume the inputs stay roughly constant over the customer's lifespan.
Worked example
A subscription coffee brand. A customer spends 50 on average, buys 4 times a year, stays for 3 years, and the business keeps a 60% gross margin. Annual value = 50 × 4 = 200 per year. Lifetime revenue = 200 × 3 = 600. Customer lifetime value = 600 × 60% = 360. If it costs 80 to acquire that customer, net CLV = 360 − 80 = 280, a healthy 4.5 : 1 CLV-to-CAC ratio.
Common mistakes
- Mixing revenue and profit. If you enter the average sale price as the purchase value, leave gross margin blank (100%) only when you genuinely want lifetime revenue; enter your real margin to get lifetime profit.
- Confusing purchases per year with total purchases. The frequency field is per year, and lifespan is in years — entering total lifetime purchases in the frequency box double-counts the relationship length.
- Comparing CLV to CAC in different units. Make sure the acquisition cost and purchase value use the same currency, or the net CLV and ratio will be meaningless.
Frequently asked questions
What is a good CLV to CAC ratio?
A common benchmark is about 3 : 1 — a customer is worth roughly three times what it costs to acquire them. Much higher (e.g. 5 : 1 or more) can mean you are under-investing in growth, while a ratio near 1 : 1 suggests acquisition is too expensive relative to the value each customer brings.
Should I use revenue or gross margin in CLV?
For a profit-based CLV, enter your gross margin so the result reflects the money you actually keep after the cost of goods or service delivery. If you leave gross margin blank the tool assumes 100%, giving lifetime revenue rather than lifetime profit.
How do I estimate customer lifespan?
If you know your annual churn rate, lifespan in years is roughly 1 ÷ churn rate — for example a 20% annual churn implies about a 5-year average lifespan. Otherwise use your observed average retention, and treat the CLV as a planning estimate rather than an exact figure.
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