Customer Lifetime Value Calculator

Calculate customer lifetime value

Customer lifetime value, abbreviated CLV or LTV, estimates the total profit a business can expect from a customer over the whole relationship. This calculator builds it from four inputs: the average order value, how many times a customer buys per year, how many years they stay a customer, and the gross margin. Multiplying the first three gives lifetime revenue, and applying the gross margin converts that revenue into profit, the true lifetime value. It also suggests a maximum customer acquisition cost of one third of CLV, a common rule of thumb.

Using gross margin rather than revenue is important, because acquiring customers who generate revenue at a loss destroys value.

Why CLV guides spending

Customer lifetime value is one of the most important metrics in marketing and subscription businesses because it sets the ceiling on what you can profitably spend to acquire a customer. If a customer is worth three hundred in lifetime profit, spending more than that to acquire them loses money. Comparing CLV to customer acquisition cost reveals whether growth is sustainable; a healthy business typically keeps CLV well above acquisition cost.

This model is a simplification that assumes steady behaviour; real CLV can be refined with retention curves and discounting of future cash flows. All calculation happens locally in your browser.

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