Free Customer Lifetime Value (CLV) Calculator
Customer Lifetime Value tells you how much a single customer is worth to your business across their entire relationship with you. It's the ceiling on what you can afford to spend to acquire one.
Results
Target CAC (3:1 ratio): up to $288.00 per customer.
What the Customer Lifetime Value Calculator does
Customer Lifetime Value (CLV) is the total net profit a business expects to earn from one customer across the entire span of their relationship with the company, not from a single transaction. It combines purchase behaviour (value and frequency) with retention (lifespan) and profitability (gross margin) into one forward-looking figure.
Methodology and formula
Gross CLV = Average Purchase Value x Purchase Frequency per Year x Customer Lifespan in Years; Net CLV = Gross CLV x Gross Margin %.
Worked example
- Inputs
- Average purchase 80; frequency 4 times/year; lifespan 3 years; gross margin 55%.
- Result
- Gross CLV 960; net CLV 528.
A customer is worth $528 in net profit over three years, so at a common 3:1 CLV:CAC ratio the business could justify spending up to about $176 to acquire that customer and still hit its target return.
When to use this tool
Use this tool to size how much a customer relationship is worth over time, particularly for setting an acquisition budget. Use the ROI Calculator for a single discrete spend rather than an ongoing relationship, and the Gross Margin Calculator to check the margin percentage you're feeding into the net CLV calculation.
About the Customer Lifetime Value Calculator
The CLV formula
Gross CLV = Average Purchase Value × Purchase Frequency per year × Customer Lifespan in years. Net CLV = Gross CLV × Gross Margin %. Net CLV is the number you actually care about because it excludes cost of delivery.
CLV and acquisition cost
The healthy ratio is CLV:CAC of at least 3:1 — for every $1 you spend to acquire a customer, you should earn $3 in net lifetime value. Below 3:1 you'll struggle to grow profitably; above 5:1 you're probably under-investing in marketing.
Improving CLV
Three levers, in order of typical impact: extend customer lifespan (retention), increase purchase frequency (engagement), then raise average order value (upsells). Retention beats acquisition on ROI almost every time.
Frequently asked questions
Should I use gross or net CLV?
How do I estimate customer lifespan?
Does CLV apply to one-off purchases?
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