Calculators
Customer Lifetime Value Calculator
Estimate what a customer is worth over the whole relationship, and how much you can afford to spend to win one.
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The tool
Enter your average order, how often customers buy and how long they stay. Add acquisition cost to see the LTV:CAC ratio.
Everything you enter stays on your own machine. Nothing is sent to us or to anyone else, which you can confirm in your browser network tab.
What people use it for
- Setting the maximum cost per acquisition for paid campaigns
- Justifying spend on retention, email and loyalty programmes
- Comparing the value of customers won through different channels
- Building the unit economics slide for an investor or board pack
- Checking how many months it takes to earn back acquisition cost
About this tool
What is customer lifetime value?
Customer lifetime value (CLV, also called LTV) is the gross profit a business expects to earn from a customer over the whole relationship. This calculator uses the standard margin-based formula: CLV = average order value × purchases per year × gross margin × customer lifespan in years.
Lifespan or churn
If you know how long customers typically stay, enter the lifespan directly. If you track annual churn instead, the calculator converts it: lifespan = 1 ÷ annual churn rate. A 25% annual churn rate implies an average lifespan of four years.
LTV to CAC ratio
Customer acquisition cost (CAC) is total sales and marketing spend divided by the number of new customers won. Dividing CLV by CAC shows how many times over a customer repays the cost of winning them. A ratio of about 3:1 is a widely used rule of thumb for a healthy, scalable business. Below 1:1 every new customer destroys value, and far above 5:1 can mean you are under-investing in growth.
CAC payback period
Payback months = CAC ÷ monthly gross profit per customer. It shows how long cash is tied up in each new customer, which matters as much as the ratio when cash flow is tight.
Worked example
Customers spend $60 per order, buy four times a year at a 50% gross margin, and stay for three years. Annual gross profit per customer is $120, so CLV is $360. If acquiring a customer costs $90, the LTV:CAC ratio is 4.0:1 and CAC is paid back in nine months.
Making CLV more accurate
- Use gross margin, not revenue. A revenue-based LTV overstates what you can afford to spend.
- Segment by acquisition channel. Customers from search, referrals and paid social often behave very differently.
- Recalculate every quarter. Retention changes faster than most teams expect.
- For long lifespans, add a discount rate. Profit in year five is worth less than the same profit today.
Use your CLV to set targets in the ROAS calculator and the ad performance calculator, and check unit margins with the profit margin calculator. Raising retention is usually the cheapest way to raise CLV; our email marketing and AI automation services build the follow-up journeys that bring customers back.
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Questions
Questions about this tool
The things clients actually want to know — costs, timelines, ownership and what happens after launch.
Multiply average order value by purchases per year, gross margin and customer lifespan in years. 60 dollars x 4 orders x 50% margin x 3 years gives a lifetime value of 360 dollars.
Around 3:1 is a widely used rule of thumb. Below 1:1 each new customer loses money, while a ratio well above 5:1 can mean you could grow faster by spending more on acquisition.
There is no practical difference. Both describe the value of a customer over the whole relationship, and the two abbreviations are used interchangeably.
Divide 1 by the annual churn rate. A 20% annual churn rate means customers stay for five years on average.
Profit. A lifetime value based on gross margin tells you what you can actually afford to spend acquiring and keeping customers, while a revenue figure overstates it.
Shorter is safer for cash flow. Many subscription businesses aim to recover acquisition cost within about 12 months, but the right target depends on funding and retention.
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