Free Customer Lifetime Value Calculator
Customer lifetime value is the gross profit one customer produces over the whole time they stay with you. Pick the model that matches your business - repeat purchase or subscription - enter the three or four figures it asks for, and add your acquisition cost to see whether what you pay to win a customer is worth what they return.
Pick repeat purchase for ecommerce, retail, or anything transactional.
Total revenue divided by number of orders, same period.
How many times an average customer buys in a year.
How long an average customer keeps buying.
Revenue left after the direct cost of delivering it.
Optional. Sales and marketing cost per new customer.
Customer lifetime value
$306.00
How to use this calculator
Four steps, and the first one decides the other three.
Pick the model that matches how you earn. Subscription if customers cancel, repeat purchase if they simply stop buying. The fields change with the choice.
Enter your margin honestly. Gross margin is what is left after the direct cost of delivering the thing you sell. Guessing high here inflates every number that follows and the error is invisible.
Fill in the rest from one period of real data. Same date range for every figure. Mixing a good quarter’s order value with a bad year’s retention produces a number that describes no business that has ever existed.
Add acquisition cost. Optional, and the point of the exercise. Without it you have a number; with it you have a decision about what you can afford to spend.
Then run it twice more, once for your best customers and once for your worst. The spread between those two results is usually more useful than the average of them, and it is the version of this calculation that changes what a business does.
What customer lifetime value means
Customer lifetime value is what one customer is worth to you in total, not what they spend once.
It is the number that decides how much you can afford to pay to acquire someone. A business that knows a customer returns $300 in gross profit can spend $100 winning them and grow. A business that only knows its average order is $85 will price its acquisition against the wrong figure and either overspend quietly or underspend and stall.
Two things separate a useful CLV from a decorative one. It has to be gross profit, not revenue - a $300 lifetime revenue at 20% margin is $60 of actual value, and paying $100 to acquire it loses money on every customer. And it has to match how your business actually earns: a subscription with monthly churn and an ecommerce store with repeat orders need different arithmetic, and using one model for the other produces a number that looks fine and means nothing.
You will also see it written LTV, and in a subscription context that abbreviation is standard. Be careful searching for it - outside marketing, LTV almost always means loan-to-value.
The two formulas, and which one is yours
Repeat purchase - ecommerce, retail, anything transactional.
Subscription - SaaS, memberships, anything with churn.
The division by churn is doing something worth understanding. A 3.5% monthly churn implies an average customer life of about 29 months - 100 divided by 3.5 - so the formula is a compressed way of saying “monthly gross profit multiplied by how many months they stay”.
Which model to use comes down to one question: does a customer leave, or do they simply stop buying for a while? A cancelled subscription is an event you can measure. A lapsed ecommerce customer is a judgement about when to stop counting. That is why the subscription model uses churn and the repeat-purchase model uses a retention period you choose.
Where each of these numbers comes from
The arithmetic is easy. Getting six defensible inputs is the actual work, and it is where most lifetime value figures quietly go wrong.
Write down which report each figure came from and which period it covers. A lifetime value number without that note is impossible to reproduce three months later, which means it is impossible to tell whether it has moved. Once churn, margin and order value are consistent, the profit margin calculator is where the gross margin figure itself is worth double-checking.
CLV on its own is a number. CLV set against what you paid to acquire the customer is a decision.
LTV:CAC ratio = customer lifetime value ÷ customer acquisition cost
The widely used rule of thumb is 3:1 - a customer worth three times what they cost to win. Below 1:1 you lose money on every customer acquired. Around 3:1 is generally considered a healthy, fundable business.
Treat that as a heuristic, not a measured benchmark. It is a rule of thumb from venture-backed SaaS that has been repeated until it sounds like a law, and the appropriate ratio genuinely varies - a business with fast payback and cheap capital can run leaner, and one with long payback needs more headroom. It is a useful starting reference and a poor stopping point.
A ratio far above 3:1 is not automatically good news either. It often means you are underinvesting in acquisition and leaving growth on the table, not that you have an exceptional business.
Historic and predictive lifetime value
There are two ways to answer the question, and they answer slightly different questions.
The historic version adds up what customers have already spent. It is factual, it needs no assumptions, and it systematically understates the value of anyone still active, because their relationship has not finished yet. It is the right basis for reporting on cohorts that have genuinely run their course.
The predictive version, which is what this calculator returns, projects the whole relationship from a rate of behaviour you supply. It is a forecast, and it is the version that can inform a decision about acquisition spend, because you are spending today against a customer who has not bought yet. The price of that usefulness is that its accuracy depends entirely on whether your churn or retention figure holds.
Use the predictive number for planning and the historic one for reporting, and never present them as though they were the same measurement. A board deck that shows one and a budget model that assumes the other is how a company ends up arguing about a number that was never in dispute.
How to raise customer lifetime value
Every input in the formula is a lever, and they are not equally easy to move.
Raise retention first. It multiplies through the entire calculation and it is usually the cheapest to change. In the subscription model, cutting churn from 3.5% to 2.8% raises lifetime value by a quarter without touching price, product or acquisition.
Increase purchase frequency. Getting an existing customer to buy a fourth time a year rather than a third is a smaller ask than winning a new customer, and it costs a fraction as much.
Raise average order value. Bundling, tiering and thoughtful upsells. Slower to move than frequency and more visible to the customer, so it carries more risk.
Improve gross margin. Often overlooked because it sits with operations rather than marketing, but it scales every other improvement. A margin gain lifts lifetime value on every customer you already have.
Fix onboarding before anything else. Most churn happens early. A customer who never reached the point of value was lost before any retention programme could reach them.
The honest ordering: retention and margin compound, frequency and order value are additive. Work in that order unless you have a specific reason not to.
Common mistakes
Calculating lifetime revenue and calling it value. The most common error on this SERP. Without gross margin, the number is inflated by the entire cost of what you sell.
Using one blended figure for all customers. A business almost always has a high-value segment and a low-value one, and the average describes neither. Segment before you act on it.
Assuming churn stays flat. Early-life churn is usually far higher than late-life churn, so a single monthly rate overstates losses for long-tenured customers and understates them for new ones.
Forgetting that lifetime value is a forecast. It projects behaviour that has not happened yet. Treat it as a planning figure with a range, not a fact.
Comparing your ratio to someone else’s. LTV:CAC varies with business model, capital cost and growth stage. Your own trend over time is the comparison that means something.
Ignoring payback period. A 4:1 ratio with a 30-month payback can starve a business of cash that a 2.5:1 ratio with 6-month payback would not.
Lifetime value is the number that decides what you can afford to spend on acquisition. See how the Zaprev team builds retention.
Or browse all free Zaprev tools.
FAQ
Frequently Asked Questions
How do you calculate customer lifetime value?
For a repeat-purchase business, multiply average order value by orders per year, by how many years a customer stays, by gross margin. For a subscription, multiply monthly revenue by gross margin and divide by monthly churn. Both give the same thing - total gross profit from one customer across the relationship.
What is a good customer lifetime value?
There is no good figure in isolation, because it scales with price and business model - a $40 lifetime value can be excellent for a low-cost product and terrible for enterprise software. What matters is the ratio to acquisition cost, and whether your own figure is rising over time.
Should lifetime value use revenue or profit?
Gross profit. Revenue-based figures overstate what a customer is worth by the whole cost of delivering the product, which leads directly to overpaying for acquisition. If a calculator does not ask for your margin, it is giving you a revenue number under a value label.
What is the difference between LTV and CLV?
Nothing - they are the same metric, and which abbreviation gets used is mostly a matter of industry habit. The one caution is that outside marketing, LTV usually stands for loan-to-value, a lending ratio with no connection to customers.
How do I work out customer lifespan from churn?
Divide 100 by your monthly churn percentage to get the average number of months. At 4% monthly churn that is 25 months. It assumes a steady churn rate, which real businesses rarely have, so treat it as an estimate rather than a measurement.
What LTV to CAC ratio should I aim for?
Three to one is the reference most often quoted, meaning a customer returns three times what they cost to acquire. It is a rule of thumb rather than a measured standard, and the right number for you depends on how quickly you recover the cost and how expensive your capital is.
How often should I recalculate it?
Quarterly is enough for most businesses, and after any pricing change, because price moves several inputs at once. Recalculating monthly tends to produce movement that reflects sampling noise rather than a real change in customer behaviour.
Where do I find these numbers in my own reporting?
Order value and purchase frequency come from your cart or billing platform, churn from your subscription system, margin from the profit and loss rather than from a marketing dashboard, and acquisition cost from finance. Pull all of them for the same window. The commonest reason two people produce different lifetime values for one business is that they used different periods, not different formulas.
What is the difference between historic and predictive lifetime value?
One counts what has happened, the other estimates what will. The backward-looking figure is exact and incomplete, since active customers keep adding to it; the forward-looking one covers the whole relationship but rests on an assumption about how long people stay. Decisions about acquisition spend need the forward-looking version.
Should the calculation account for the time value of money?
Only if the relationship is long and your cost of capital is high. Discounting future profit is standard in finance and makes a visible difference across five or ten years; across two it usually changes the answer by less than the uncertainty in your retention figure. Fix the inputs first, then worry about discounting.