Customer Lifetime Value (CLV) Calculator
Calculate Customer Lifetime Value using simple or advanced discounted methods.
Includes CLV:CAC ratio, churn rate, and marketing budget guidance.
What Is Customer Lifetime Value? Customer Lifetime Value (CLV, also LTV or CLTV) is the total net profit a business expects to earn from a customer over the entire relationship. It is the most important metric for deciding how much to spend acquiring new customers.
Simple CLV Formula CLV = Average Purchase Value × Purchase Frequency × Customer Lifespan
Where:
- Average Purchase Value = total revenue / number of purchases
- Purchase Frequency = purchases per year
- Customer Lifespan = average number of years a customer stays
Advanced CLV Formula (with Churn and Margin) CLV = (Average Order Value × Purchase Frequency × Gross Margin %) / Annual Churn Rate
This version accounts for:
- Gross margin (what you actually keep after cost of goods)
- Churn rate (the annual percentage of customers who leave)
- Customer lifespan is implied: 1 / Churn Rate
Discounted CLV (Most Rigorous) Discounted CLV = Σ (Annual Margin / (1 + Discount Rate)^t) for t = 1 to N years
This applies a discount rate (time value of money) — a dollar earned 5 years from now is worth less than a dollar today.
The CLV:CAC Ratio CAC = Customer Acquisition Cost (marketing spend / new customers acquired) CLV:CAC ratio > 3:1 is considered healthy for most businesses. Below 1:1 means you are losing money on every customer.
Payback Period Payback Period = CAC / (Monthly Revenue per Customer × Gross Margin) SaaS companies typically aim for a payback period under 12 months.
How to Use CLV for Marketing Budget A common rule of thumb: you can afford to spend up to 1/3 of CLV to acquire a customer (maintaining 3:1 ratio). If CLV = $600, your CAC ceiling is $200.
Higher CLV justifies higher ad spend, longer sales cycles, and more personalized onboarding.