Customer Lifetime Value Calculator

Calculate how much revenue a customer generates over their entire relationship with your business. Essential for marketing ROI and customer acquisition decisions.

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Quick Facts

Ideal CLV:CAC Ratio
3:1 or higher
Earn $3 for every $1 spent acquiring
Retention Impact
5% = 25-95% profit
5% retention increase = 25-95% profit increase
Acquisition Cost
5x more expensive
New customers cost 5x more than retention
SaaS Benchmark
CLV:CAC > 3:1
Industry standard for healthy SaaS

Your Results

Calculated

Key Takeaways

  • CLV predicts total revenue from a single customer over your entire relationship
  • A healthy CLV:CAC ratio is 3:1 or higher
  • Improving customer retention by 5% can increase profits by 25-95%
  • It costs 5x more to acquire a new customer than retain an existing one
  • CLV helps determine your maximum customer acquisition cost

What is Customer Lifetime Value (CLV)?

Customer Lifetime Value (also called LTV or CLTV) is a prediction of the total revenue a business can expect from a single customer account throughout the entire business relationship. It helps businesses understand how much they should invest in acquiring and retaining customers.

CLV is one of the most important metrics for any business because it shifts focus from short-term transactions to long-term customer relationships. Understanding CLV helps you make smarter decisions about marketing spend, customer service investments, and product development.

The CLV Formula

CLV = Average Purchase Value x Purchase Frequency x Customer Lifespan

For a more sophisticated calculation that accounts for profit margins and the time value of money:

Profit-Based CLV = (Avg Purchase x Frequency x Lifespan) x Profit Margin

How to Use This Calculator

1

Enter Average Purchase Value

The average amount a customer spends per transaction. Calculate this by dividing total revenue by number of purchases.

2

Enter Purchase Frequency

How many times per year a typical customer makes a purchase from your business.

3

Enter Customer Lifespan

The average number of years a customer continues to buy from you before churning.

4

Add Optional Metrics

Include profit margin for profit-based CLV, acquisition cost for CLV:CAC ratio, and discount rate for NPV calculation.

Why CLV Matters

  • Marketing Budget: Determines how much you can profitably spend to acquire customers
  • Customer Segmentation: Identifies your most valuable customers for targeted marketing
  • Business Valuation: CLV is a key metric investors use to value companies
  • Retention Focus: Highlights the long-term value of keeping customers happy
  • Resource Allocation: Helps prioritize which customers deserve more attention

CLV to CAC Ratio

The CLV:CAC ratio shows the relationship between customer lifetime value and acquisition cost. This ratio is crucial for understanding business health:

  • Below 1:1 - You're losing money on each customer. Unsustainable.
  • 1:1 to 3:1 - Breaking even or slight profit. Room for improvement.
  • 3:1 to 5:1 - Healthy ratio. This is the sweet spot for most businesses.
  • Above 5:1 - Excellent! But consider if you're under-investing in growth.

Pro Tip: Improving Your CLV

The fastest ways to improve CLV are: (1) increase average order value through upselling and cross-selling, (2) improve purchase frequency with engagement campaigns, and (3) extend customer lifespan through excellent service and loyalty programs. Even small improvements in each area compound significantly.

Ways to Improve CLV

  • Increase average order value through upselling and bundles
  • Improve purchase frequency with email marketing and engagement
  • Extend customer lifespan through loyalty programs and excellent service
  • Improve profit margins through operational efficiency
  • Reduce customer acquisition costs with referral programs
  • Implement subscription models for predictable recurring revenue

CLV Benchmarks by Industry

  • E-commerce: CLV:CAC of 3:1 is considered healthy
  • SaaS: Aim for CLV:CAC of 3:1 or higher, with CAC payback under 12 months
  • Subscription boxes: Target 4:1 ratio due to higher churn rates
  • B2B services: Ratios of 5:1+ are common due to longer contracts