Business & SaaS

Customer Lifetime Value Calculator

What this does

Estimate the gross profit an average customer generates over their entire relationship with your business.

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Calculator inputs

Estimate from churn: 100 ÷ churn % gives lifetime in periods.

How to use it

Using the customer lifetime value calculator

  1. 01

    Enter average purchase value

    Total revenue divided by number of orders gives the average ticket.

  2. 02

    Add frequency and margin

    Orders per customer per year, then your gross margin percentage.

  3. 03

    Set expected retention

    Use churn data; 100 divided by monthly churn percent approximates lifetime in months; divide by 12 for years.

Good to know

Why CLV uses profit, not revenue

A $1,000-a-year customer at a 20% margin contributes $200 toward your costs; the same spend at a 70% margin contributes $700. Acquisition budgets built on revenue-based “LTV” quietly overspend themselves into insolvency. Always shrink the number to gross profit before comparing it to CAC.

Levers that move CLV

  • Increase purchase frequency via subscriptions, replenishment reminders or bundles.
  • Raise margin through premium tiers or cheaper fulfillment.
  • Extend retention; often the largest lever, per the churn calculator’s lifetime math.

Because the four factors multiply, modest improvements in each combine multiplicatively rather than additively.

How it's calculated

The math behind this calculator

CLV = Avg purchase × Purchases/year × Gross margin % × Retention years

Annual customer value equals purchase value multiplied by purchase frequency; applying gross margin converts revenue into actual profit contribution, and multiplying by expected retention years extends it across the relationship. Using gross profit rather than revenue keeps the number honest; revenue a customer generates is not money available to fund acquisition.

Assumptions & limitations

  • Purchase value, frequency and margin stay roughly stable across the customer’s life.
  • Retention is entered in years; derive it from churn data where possible.
  • Discounting (time value of money) is ignored; fine for short lifetimes, optimistic for decade-long ones.

Worked example

A customer who buys $80 twice a month at a 60% gross margin and stays three years contributes $3,456 of gross profit; the true ceiling for what acquiring them can cost.

FAQ

Frequently asked questions

How do I estimate retention years?
Divide 100 by your churn percentage for lifetime in periods, then convert to years (e.g. 5% monthly churn → 20 months ≈ 1.7 years).
Should I include acquisition cost inside CLV?
No; keep CLV as gross profit generated, and compare it to CAC separately via the LTV:CAC ratio. Mixing them hides whether the relationship is profitable.
Is this CLV or LTV?
The terms are used interchangeably; some analysts reserve “lifetime value” for revenue and “customer lifetime value” for profit. This calculator computes the profit version deliberately.

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