Customer Lifetime Value (CLV) Calculator
How much a typical customer is worth over the whole relationship, in revenue and in profit, and how that compares with what it costs to win them.
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- Formula and worked example included
Customer Lifetime Value Calculator
Enter your figures to see results.
What is customer lifetime value, in plain terms?
Customer lifetime value is the total a typical customer is worth to you over the whole time they keep buying, not just their first order. Someone who spends £45 six times a year for three years is worth £810 in sales, which changes how much you can sensibly spend to win them.
How to use this calculator
- Enter your average order value and how many times a typical customer buys in a year.
- Enter how many years a customer usually stays. If you know your annual churn, lifespan is 1 ÷ churn.
- Add your gross margin to see lifetime profit, and your acquisition cost to see whether each customer pays for themselves.
What your result means
How to read the figure, what counts as normal, and what to do about it.
Why lifetime value changes how you run marketing
If you judge marketing on the first sale, almost nothing looks affordable: spending £60 to win a customer who spends £45 is a loss. If that customer comes back six times a year for three years, the same £60 bought £810 of revenue. Lifetime value is what lets you set an acquisition budget with confidence, decide which customer segments deserve more attention, and put a number on retention.
Reading the CLV:CAC ratio
| Ratio | What it usually means |
|---|---|
| Under 1:1 | Each customer costs more than they ever return. Stop, and fix either retention, pricing or channel. |
| 1:1 to 3:1 | Profitable but thin once overheads are considered. Acceptable while learning a channel, not for scale. |
| 3:1 to 5:1 | Healthy. Common target for established consumer and B2B businesses. |
| Above 5:1 | Very efficient, or under-investing in growth. Test whether spending more still returns 3:1 or better. |
Lifting lifetime value
Only three things move it: order value, frequency and lifespan. Bundles, minimum-spend thresholds and cross-selling lift order value. Subscriptions, reminders and loyalty schemes lift frequency. Onboarding, service quality and win-back campaigns extend lifespan. A 10% improvement in each compounds to a 33% rise in CLV, usually cheaper than a 33% rise in new-customer acquisition.
Worked example: an independent pet-food subscription
Customers spend an average of £45 per order and order 6 times a year. Cohort data shows they stay for about 3 years. Gross margin after product and delivery is 55%. Winning a customer through paid social and referrals costs £60.
Lifetime revenue = 45 × 6 × 3 = £810. Lifetime profit = 810 × 0.55 = £445.50.
CLV:CAC = 445.50 ÷ 60 = 7.4 : 1. Annual profit per customer is £148.50, so the £60 is paid back in under five months. The business can afford to spend considerably more to grow faster and still stay above 3:1.
Frequently asked questions
How do I work out customer lifespan?
Divide 1 by your annual churn rate. If 30% of customers stop buying each year, lifespan is 1 ÷ 0.3 ≈ 3.3 years. For a young business with little history, use a conservative estimate and revisit it as data builds up.
Should CLV use revenue or profit?
Profit, whenever you are comparing it with acquisition cost. Revenue-based CLV flatters low-margin businesses and leads to overspending on acquisition.
What is a good CLV to CAC ratio?
3:1 is the usual benchmark. Below that, growth is expensive; well above 5:1 often means you could grow faster by spending more.
How does CLV differ between B2B and B2C?
B2B customers typically have higher order values, lower frequency and much longer lifespans, so CLV is dominated by retention. B2C is more sensitive to frequency and order value. The formula is the same; the levers differ.
The maths behind this calculator
For anyone who wants to check the working or rebuild it in a spreadsheet.
The formula
Lifetime revenue = Average order value × Purchases per year × Lifespan (years) Lifetime profit = Lifetime revenue × Gross margin CLV : CAC ratio = Lifetime profit ÷ Customer acquisition cost Payback (months) = CAC ÷ (Annual profit per customer ÷ 12)
Use gross margin, not net, so that marketing and overheads are not counted twice. If you cannot measure lifespan directly, take your annual churn rate: 25% churn means the average customer lasts four years.
Assumptions and limits
- This is the simple (historic) CLV model: it assumes purchase behaviour stays constant and does not discount future profit. For long lifespans or high inflation, a discounted model gives a lower, more conservative figure.
- Lifespan is the average across all customers, including those who buy once and disappear. Using only your loyal customers will overstate CLV.
- Gross margin should be after direct costs that scale with each order (product, packaging, delivery, payment fees) but before marketing and overheads.
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