Customer Lifetime Value Calculator
Calculate customer lifetime value (CLV) from average purchase value, purchase frequency, and customer lifespan, with an optional acquisition cost deduction.
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years
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Net Customer Lifetime Value
$850.00
Gross CLV
$900.00
Acquisition Cost
$50.00
How Customer Lifetime Value Is Calculated
Customer lifetime value (CLV) estimates the total revenue a business can expect from a single customer over the entire relationship. Multiply the average purchase value by how often a customer buys per year, then by the average number of years they stay a customer. Subtracting the customer acquisition cost (CAC) gives a net CLV that reflects actual profit contribution rather than gross revenue.
Net CLV = CLV − Customer Acquisition Cost
Example
A customer who spends $75 per order, buys 4 times a year, and stays a customer for 3 years has a gross CLV of $900. If it cost $50 in marketing and sales spend to acquire that customer, the net CLV comes down to $850 — still a strong return on the acquisition investment.
Common Use Cases
- Deciding how much you can afford to spend acquiring a new customer.
- Comparing the long-term value of different customer segments or channels.
- Justifying investment in retention and loyalty programs.
- Forecasting revenue contribution from an expanding customer base.
FAQs
What is a healthy CLV to CAC ratio?
A commonly cited benchmark is a CLV to CAC ratio of at least 3:1, meaning a customer generates three times what it cost to acquire them. Below that, growth can be unprofitable once overhead is included.
How do I estimate customer lifespan?
Divide 1 by your annual customer churn rate. For example, a 25% annual churn rate implies an average customer lifespan of 4 years (1 ÷ 0.25). If you don't track churn yet, a conservative estimate based on historical repeat-purchase data works as a starting point.
Should I use gross or net CLV for decisions?
Net CLV, which subtracts acquisition cost, gives a truer picture of profitability. Gross CLV is still useful for understanding total revenue potential before costs are factored in.