Customer Lifetime Value Calculator
Estimate customer lifetime value from average order, purchase frequency, margin and lifespan — with a sensitivity table and CLV-to-CAC guidance. Free.
About the Customer Lifetime Value Calculator
Customer lifetime value (CLV or LTV) is the total profit a typical customer generates over their whole relationship with your business — the number that tells you how much you can afford to spend acquiring one. This calculator uses the standard formula: CLV = average order value × purchases per year × gross margin % × customer lifespan in years.
For example, an online store with a 2,000 average order, customers buying 6 times a year, a 30% gross margin and a 3-year average lifespan has CLV = 2,000 × 6 × 0.30 × 3 = 10,800 per customer — even though lifetime revenue is 36,000. The margin step matters: CLV built on revenue instead of profit overstates what you can spend on ads. A sensitivity table shows how CLV moves as lifespan changes, because retention is usually the strongest lever.
E-commerce sellers, subscription businesses and agencies use CLV with customer acquisition cost (CAC): the classic health benchmark is a CLV at least 3 times CAC. If the store above pays 5,000 to acquire a customer, the 10,800 CLV gives a ratio of 2.2 — workable but thin; improving retention from 3 to 4 years lifts CLV to 14,400 and the ratio to 2.9.
How to Use the Customer Lifetime Value Calculator
- 1Enter your average order value and how many times a customer buys per year.
- 2Enter your gross margin percentage.
- 3Enter the average customer lifespan in years.
- 4Read the CLV, lifetime revenue and the lifespan sensitivity table.
Frequently Asked Questions
How do I calculate customer lifetime value with an example?
CLV = average order value × purchase frequency per year × gross margin × lifespan. With a 2,000 order value, 6 purchases a year, 30% margin and 3-year lifespan: 2,000 × 6 × 0.30 × 3 = 10,800 of lifetime gross profit per customer.
Should CLV use revenue or profit?
Profit — apply your gross margin. The example customer generates 36,000 of lifetime revenue but only 10,800 of gross profit. Marketing budgets funded from revenue-based CLV routinely overspend by 2–3x, because acquisition costs must be recovered from margin, not sales.
What is a good CLV to CAC ratio?
The widely used benchmark is 3:1 — lifetime profit at least three times the cost to acquire the customer. Below ~2:1 growth burns cash; far above 5:1 may mean you are under-investing in growth. With CLV of 10,800, a healthy CAC ceiling is around 3,600.
How do I estimate customer lifespan if I don't know it?
Use lifespan = 1 ÷ annual churn rate. If 25% of customers stop buying each year, average lifespan ≈ 1 ÷ 0.25 = 4 years; at 50% churn it is 2 years. New businesses without history can start with 1–3 years and refine as data accumulates — the sensitivity table shows the impact of being wrong.
What is the fastest way to increase CLV?
In order of typical impact: retention (each extra year of lifespan adds a full year of profit — moving from 3 to 4 years lifts the example CLV from 10,800 to 14,400), purchase frequency (email/WhatsApp reorder campaigns), then average order value (bundles, upsells). Margin improvements multiply everything.