How it works
Customer lifetime value (CLV or LTV) estimates how much gross profit a typical customer generates before they stop buying. It tells you how much you can afford to spend acquiring and keeping a customer.
This calculator uses the common historical method: average order value × purchases per year × years as a customer × gross margin. Using gross profit rather than revenue keeps the comparison with acquisition cost honest.
If you know your annual churn rate instead of lifespan, average lifespan is roughly 1 ÷ churn rate. A 25% annual churn implies about 4 years.
Formula
CLV = Average order value × Purchases per year × Lifespan (years) × Gross margin.
Questions people ask
What is a good LTV to CAC ratio?
A ratio of about 3:1 is the widely cited target. Below 1:1 you lose money on each customer; well above 5:1 can mean you are underinvesting in growth.
Should CLV use revenue or profit?
Profit, at least gross profit. Revenue-based CLV overstates what a customer is worth because it ignores the cost of serving them.
How do I estimate customer lifespan?
Use 1 divided by your churn rate for the same period. For example, 2% monthly churn implies an average lifespan of 50 months, about 4.2 years.