Free marketing tool
Free Customer Lifetime Value Calculator
Work out how much gross profit an average customer brings in over their whole time with you. Pick subscription (SaaS) or ecommerce, enter your numbers, and add your customer acquisition cost (CAC) to get your LTV:CAC ratio and CAC payback period.
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Calculate your customer lifetime value
Customer lifetime value (CLV)
$1,000.00
Average customer lifetime: 25 months at $40.00 gross profit per month
- LTV:CAC ratio
- 4.0:1
- CAC payback
- 6.25 months
Formulas
CLV = revenue per month x margin / monthly churn
LTV:CAC = CLV / CAC · payback = CAC / gross profit per month
What is customer lifetime value?
Customer lifetime value (CLV, also called LTV) is the total gross profit you expect from one customer, from their first purchase to the day they leave. It tells you how much you can afford to spend to win a customer and still make money. This is customer lifetime value, not the loan-to-value (LTV) ratio used in mortgages.
How to calculate CLV
Subscription or SaaS: CLV = average revenue per customer per month x gross margin / monthly churn rate. The average customer lifetime is 1 / churn, in months.
Example: customers pay $50 a month, your gross margin is 80% and 4% of customers cancel each month. Gross profit per month is $50 x 0.8 = $40. The average lifetime is 1 / 0.04 = 25 months. CLV = $40 x 25 = $1,000.
Ecommerce: CLV = average order value x purchases per year x gross margin x years as a customer.
Example: the average order is $80, customers buy 3 times a year, your gross margin is 40% and they stay about 3 years. CLV = $80 x 3 x 0.4 x 3 = $288.
These are simple averages. They assume churn and spend stay steady over time, so treat the result as an estimate and recalculate as you get more data.
LTV:CAC ratio and CAC payback
The LTV:CAC ratio compares lifetime value with customer acquisition cost (CAC): what you spend on ads, sales and marketing to win one customer. With a CLV of $1,000 and a CAC of $250, the ratio is 4:1.
A common rule of thumb is that 3:1 or better is healthy. Treat it as a starting point, not a target that fits every business. Below 1:1 you lose money on each new customer.
CAC payback is how many months of gross profit it takes to earn back the acquisition cost. In the example, $250 / $40 per month = 6.25 months. For ecommerce, gross profit per month is order value x purchases per year / 12 x margin. A shorter payback means you get your cash back sooner and can reinvest it in growth.
How to raise customer lifetime value
Keep customers longer. In a subscription business, churn has the biggest effect: cutting monthly churn from 4% to 3% raises the average lifetime from 25 to about 33 months.
Raise order value and purchase frequency. Bundles, upsells, free shipping thresholds and reorder reminders all lift what each customer spends.
Test your pricing and offers. Small changes to price, plans or checkout can move CLV a lot, but guesses are risky. Run an A/B test and use the A/B testing ROI calculator to see what a lift is worth. Check that new visitors still convert with the conversion rate calculator, and make sure your ads earn back their cost with the ROAS calculator.
FAQ
How do you calculate customer lifetime value?
For a subscription business: CLV = average revenue per customer per month x gross margin / monthly churn rate. For ecommerce: CLV = average order value x purchases per year x gross margin x years as a customer.
What is a good LTV to CAC ratio?
A common rule of thumb is 3:1, meaning a customer brings in three times what it cost to win them. It is a guide, not a law: early-stage companies often run lower while they learn, and a very high ratio can mean you are spending too little on growth.
Is LTV the same as CLV?
Yes. LTV (lifetime value) and CLV (customer lifetime value) are two names for the same thing. Note that a plain "LTV calculator" in banking means loan-to-value, which is unrelated.
Should CLV use revenue or gross profit?
Use gross profit (revenue x gross margin) when you compare CLV with acquisition cost. Revenue-based CLV looks bigger but ignores the cost of serving the customer, so it makes the LTV:CAC ratio look better than it is.
See which customers are worth the most
PageDuel tracks visitors, signups and revenue by source and campaign, then lets you A/B test pricing and pages to raise lifetime value.
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