Customer Lifetime Value Calculator
Calculate CLV, how much revenue an average customer generates over their lifetime with your business.
CLV is the metric that determines how much you can spend to acquire a customer and still be profitable. Without it, marketing spend is a guess. With it, you can set a defensible acquisition cost ceiling and know whether your retention rate needs to improve before you scale spending.
A healthy LTV:CAC ratio is 3:1 or higher. If your CLV is $360 and you're spending $120 to acquire a customer, you're at exactly 3:1, the minimum threshold for a sustainable growth model.
How CLV is calculated
The simplest CLV formula: average purchase value × purchase frequency × customer lifespan. A customer who buys $120 of product 4 times per year for 3 years has a revenue CLV of $1,440. Multiply by your gross margin to get profit CLV, the amount of gross profit generated per customer over their lifetime, which is what actually matters for evaluating acquisition cost.
The LTV:CAC ratio
The ratio of customer lifetime value to customer acquisition cost is one of the most important metrics for any growth-stage business. A ratio below 1:1 means you're losing money on every customer acquired, unsustainable. Between 1:1 and 3:1 is typically thin, you're covering acquisition costs but may not be generating enough to cover overhead. Above 3:1 is generally healthy. Above 5:1 may indicate you're underinvesting in acquisition and could grow faster by spending more.
CAC payback period
CAC payback tells you how many months until a customer has generated enough gross profit to cover what it cost to acquire them. A 12-month payback means you're cash-flow negative on each customer for their first year. For subscription businesses, payback under 12 months is generally considered healthy. Longer paybacks require more working capital to fund growth, you're essentially financing customer acquisition with operating cash.
Improving CLV
Three levers: increase average order value (upsells, bundles, premium tiers), increase purchase frequency (loyalty programs, re-engagement, subscription models), or extend customer lifespan (better onboarding, customer success, product improvements that reduce churn). Reducing churn has the most powerful effect because it compounds, keeping a customer for 4 years instead of 3 increases CLV by 33% without changing anything about what they buy or how often.
Frequently asked questions
How do I calculate customer acquisition cost?
CAC = total sales and marketing spend ÷ number of new customers acquired in the same period. Include all costs: ad spend, sales staff salaries, marketing tools, agency fees, and any other costs directly associated with acquiring customers. Overhead costs (product development, customer success, G&A) are typically not included in CAC.
Is CLV the same as LTV?
LTV (lifetime value) and CLV (customer lifetime value) are used interchangeably. Some companies define LTV as revenue-based and CLV as profit-based, but there's no universal convention. Always clarify whether a cited number is gross profit or revenue-based when comparing across organizations.
How accurate is this CLV estimate?
The simple formula here is a starting point. More sophisticated CLV models incorporate discount rates (the time value of money makes future revenue worth less than present revenue), customer-level cohort data (different acquisition channels produce different-quality customers), and survival analysis (customers churn at different rates at different stages of the relationship).