Customer Lifetime Value Calculator
Customer lifetime value is the profit a customer brings over the whole relationship. Set against the cost of winning that customer, it answers how much a business can afford to spend on acquisition and still make money.
Everything above runs in your browser and saves to this device only. Enter the figures for an average customer. The sample describes a hotel guest who books 2.4 times a year.
How it works
The annual margin per customer is order value times purchases per year times gross margin. Retention sets the chance a customer is still buying each year, and the discount rate converts future profit to today’s value.
CLV over T years = Σt=0T−1 m × rt ÷ (1 + d)t
CLV over an open-ended horizon = m × (1 + d) ÷ (1 + d − r)
Simple CLV = m ÷ (1 − r)
r is the retention rate and d the discount rate. A CLV to CAC ratio of 3 to 1 or more is a common benchmark for a healthy acquisition budget.
Frequently Asked Questions
What is customer lifetime value?
Customer lifetime value (CLV) is the profit a customer brings over the whole relationship, stated in today's money. Set against the cost of acquiring a customer, it shows how much a business can afford to spend on acquisition.
How do you calculate customer lifetime value?
Multiply order value, purchases per year, and gross margin to get the annual margin. Then add up each year's margin, weighted by the chance the customer is still buying and discounted to today. Over an open-ended horizon, CLV is the annual margin times (1 + d) divided by (1 + d minus r).
What is a good CLV to CAC ratio?
3 to 1 is a common benchmark for the CLV to CAC ratio. Much lower means acquisition costs too much. Much higher can mean the business is under-investing in growth.
How does retention affect customer lifetime value?
Retention compounds year on year. In the sample, raising retention from 62% to 75% lifts five-year CLV by about a quarter, from 843 to 1,051.
Is this Customer Lifetime Value Calculator free?
Yes. The Customer Lifetime Value Calculator is free and opens straight away in any modern browser, including on a phone. Everything you enter is processed in your browser and stays on your device.