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Customer Lifetime Value (CLV) Calculator

Find how much a customer is worth over their lifetime.

How it is calculated

The tool estimates the profit a customer brings over the whole relationship: CLV = ARPU × margin / 100 × lifespan. ARPU is the average revenue per customer per period, margin is the gross margin in percent (the share of revenue left after the direct cost of serving the customer) and lifespan is how many of those same periods a typical customer stays. The period must match: monthly ARPU needs a lifespan in months. The tool also shows the gross revenue, ARPU × lifespan, before margin. Lifespan must be above zero. It is a simple model: no discounting of future money, no churn curve, no acquisition cost. Subtract the cost of winning a customer yourself to see whether growth pays off.

Worked example

A subscription brings in 40 per customer per month, has a 60% gross margin, and customers stay 18 months on average. Revenue over the lifetime is 40 × 18 = $720.00. Applying the margin gives 720 × 0.60 = $432.00, which is the customer lifetime value. If winning a new customer costs 150, each customer still leaves about 282 of profit. The tool shows a CLV of $432.00 next to a gross revenue figure of $720.00.

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Common mistakes

  • Mixing periods, such as annual ARPU with lifespan in months, which inflates or shrinks the value by a factor of 12.
  • Using the net profit margin or leaving out the margin altogether. Using revenue instead of profit overstates the value of a customer.
  • Guessing the lifespan from a few loyal customers. The average should include those who leave early.
  • Comparing CLV with the acquisition cost without discounting. Money received in two years is worth less today.

Sources

About this calculator

This calculator estimates Customer Lifetime Value using CLV = ARPU × gross margin × average customer lifespan — the total profit a business can expect from a typical customer over the entire relationship, not just from a single purchase.

Startups and subscription businesses use it to check that their customer acquisition cost (CAC) leaves enough room for profit — a common rule of thumb targets an LTV:CAC ratio of at least 3:1 — while marketing teams use it to decide how much they can afford to spend acquiring a new customer in a given channel.

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Comments (1)

  • Editorial team

    If you do not know the average lifespan, estimate it from churn: lifespan is roughly 1 divided by the churn rate per period, so 5% monthly churn suggests about 20 months. The result is margin-based profit before acquisition cost and ignores discounting, so a long assumed lifespan can make the figure look better than it will turn out. What churn or retention figure do you use for your own business?

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