Customer Lifetime Value (CLV) Calculator
Estimate how much revenue and profit an average customer generates over their entire relationship with your business.
What is Customer Lifetime Value (LTV)?
Customer Lifetime Value estimates the total revenue a business can expect from a single customer over the entire span of their relationship with the company. It's calculated by multiplying the average purchase value by the average purchase frequency (giving you annual value per customer), then multiplying that by the average customer lifespan in years. LTV is one of the most important metrics in business because it tells you how much a customer is actually worth — information that directly shapes how much you can afford to spend acquiring one.
Revenue-based LTV versus profit-based LTV
The basic LTV formula calculates revenue, not profit — and revenue can be misleading if your margins are thin. Profit-based LTV multiplies revenue-based LTV by your gross margin percentage, giving a more realistic picture of what a customer is actually worth to your bottom line after accounting for the cost of goods or services sold. A business with 80% margins gets to keep far more of each customer's lifetime spend than one with 20% margins, even if their revenue-based LTV numbers look identical.
Why LTV matters for marketing and growth decisions
Knowing your LTV lets you set a rational customer acquisition cost (CAC) budget — spending close to or above your LTV on acquisition is a losing strategy, while a large gap between LTV and CAC (commonly targeted at a 3:1 ratio or better) signals a healthy, scalable growth engine. LTV also helps prioritize retention efforts: since increasing customer lifespan or purchase frequency compounds directly into higher lifetime value, even small improvements in retention can be more valuable than acquiring new customers.
Frequently Asked Questions
How do you calculate customer lifetime value?
Multiply the average purchase value by the average purchase frequency per year to get annual value per customer, then multiply that by the average customer lifespan in years. That gives you revenue-based lifetime value.
What's the difference between revenue-based and profit-based LTV?
Revenue-based LTV is the total amount a customer is expected to spend. Profit-based LTV multiplies that figure by your gross margin percentage, showing what the customer is actually worth to your bottom line after costs.
How is LTV used to guide marketing spend?
LTV sets a ceiling on how much you can profitably spend to acquire a customer. Many businesses target an LTV to customer acquisition cost (CAC) ratio of 3:1 or higher as a sign of healthy, sustainable growth.
What is a good customer lifetime value?
There's no universal number — it depends heavily on your industry, price point, and margins. What matters more is the ratio between your LTV and your customer acquisition cost, and whether that ratio supports profitable growth.
How can I increase customer lifetime value?
You can increase purchase frequency (through re-engagement or subscriptions), raise average purchase value (through upsells or bundling), or extend customer lifespan (through better retention and customer experience) — all three levers compound directly into higher LTV.
Does LTV account for the time value of money?
This simplified calculator does not discount future revenue to present value. More advanced LTV models sometimes apply a discount rate to account for the fact that money earned years from now is worth less than money earned today.
Is LTV the same for every customer?
No, this calculator produces an average across your whole customer base. In practice, LTV varies widely by customer segment, acquisition channel, and product line — many businesses calculate LTV separately for different customer cohorts.
Why does gross margin matter so much for LTV?
Two businesses can have identical revenue-based LTV but very different profit-based LTV if their gross margins differ — a business with thin margins keeps far less of each dollar a customer spends, which changes how much they can afford to spend acquiring that customer.