Customer Lifetime Value Calculator

Customer Lifetime Value Calculator: calculate customer lifetime value for your business. Formula, benchmarks, and practical tips included.

Customer lifetime value (CLV or LTV) estimates the total net margin a business expects to earn from a customer over the entire duration of the relationship. It is the most important strategic metric for subscription businesses, e-commerce stores, and any model with repeat purchase potential — it determines how much a business can rationally spend to acquire each customer (CAC) while remaining profitable. CLV directly drives decisions on marketing investment, customer segment prioritisation, and product development roadmaps. Profit Margin Calculator is the essential companion metric — the LTV:CAC ratio determines unit economics viability.

For subscription: CLV = Monthly gross margin per customer × Average customer lifetime in months.
For e-commerce: CLV = Average order value × Purchase frequency per year × Gross margin % × Average customer lifespan in years.
For a discounted CLV (accounting for time value of money): use monthly discount rate in the formula.
Segment CLV by acquisition channel, product line, and customer cohort to identify your highest-value customer types.
Compare CLV against CAC to assess unit economics — target LTV:CAC ≥ 3:1.

CLV/LTV formulas

Simple subscription LTV = Monthly gross margin × Average lifetime (months)

E-commerce LTV = AOV × Purchase frequency × Gross margin % × Customer lifespan (years)

Discounted LTV = Σ [Monthly margin ÷ (1 + monthly discount rate)^month] over customer lifetime

Worked example (subscription): Monthly subscription 50. Gross margin 75%. Monthly gross margin = 37.50. Average customer stays 28 months. LTV = 37.50 × 28 = 1,050. If CAC = 300, LTV:CAC = 3.5× — healthy.

Worked example (e-commerce): AOV 80. Purchases 4×/year. Gross margin 45%. Average lifespan 3.5 years. LTV = 80 × 4 × 0.45 × 3.5 = 504.

Using CLV to drive decisions

CLV by business model

CLV benchmarks vary enormously by business model. Enterprise SaaS (ACV 50,000+): LTV often 200,000–500,000+ over 5–8 year average lifespan. SMB SaaS (ACV 2,000): LTV 5,000–15,000. E-commerce (replenishment): LTV 200–500. E-commerce (big-ticket, infrequent): LTV may be close to a single-purchase value. Financial services: LTV of a mortgage customer typically 10,000–30,000 in margin over the full customer relationship. The higher the CLV, the more rational it is to invest in acquisition and retention.

Business tips and best practices

Improving retention has a multiplicative effect on CLV — a 10% reduction in monthly churn can increase LTV by 20–50% depending on the baseline churn rate.
Segment CLV by acquisition cohort — customers acquired through different channels often have significantly different retention rates and purchase patterns.
Use historical cohort data for LTV calculations wherever possible — predicted LTV based on early cohort behaviour is more accurate than formula-based estimates for established businesses.

A 1% reduction in monthly churn increases LTV by approximately 10–20% at typical churn levels — retention investment is almost always higher-ROI than new acquisition for businesses with established customer bases.
Amazon Prime members have an estimated LTV of 2,500–3,500 vs approximately 800 for non-Prime members — illustrating the enormous impact of subscription loyalty programs on CLV.

Common mistakes to avoid

Not accounting for gross margin — CLV must be calculated on margin contribution, not revenue; a high-revenue, low-margin customer can have a negative CLV after fully-loaded costs.
Using average LTV for all segments — the average hides the fact that the top 20% of customers often generate 60–80% of total CLV; segment analysis is essential for strategic decision-making.

CLV projections are forward-looking estimates based on historical data and assumed future behaviour. They are not guarantees of future revenue. CLV figures used in investor materials are forward-looking statements subject to applicable securities law. Customer data used for CLV modelling must be handled in compliance with applicable data protection regulations. This calculator is for planning purposes only.