Customer Lifetime Value Calculator
Customer Lifetime Value
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CLV:CAC Ratio
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Annual Revenue Per Customer
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Net CLV (after acquisition cost)
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Understanding Customer Lifetime Value
Customer Lifetime Value (CLV or LTV) is the total profit a business can expect from a single customer over the entire relationship. The basic formula is: CLV = Average Order Value x Purchase Frequency x Customer Lifespan x Profit Margin. This metric helps you determine how much to spend acquiring new customers.
The CLV:CAC ratio compares lifetime value to customer acquisition cost. A ratio of 3:1 is considered healthy — you earn three times what you spend to acquire each customer. Below 1:1 means you are losing money on each customer. Above 5:1 might mean you are underinvesting in growth.
To increase CLV, focus on increasing any component: raise average order value through upselling and cross-selling, increase purchase frequency through loyalty programs and email marketing, extend customer lifespan through excellent service and engagement, or improve margins through operational efficiency.
Frequently Asked Questions
What is a good CLV:CAC ratio?
A 3:1 ratio is considered the benchmark for a healthy business. Below 1:1 means you lose money on each customer. Between 1:1 and 3:1 suggests room for improvement. Above 5:1 may indicate you can afford to invest more in growth.
How do I calculate average customer lifespan?
Divide 1 by your annual churn rate. If 25% of customers leave each year, average lifespan is 1/0.25 = 4 years. Track how long customers remain active to get a more accurate figure.
Why is CLV important for business?
CLV tells you the maximum you should spend to acquire a customer and still be profitable. It also helps prioritize retention over acquisition — increasing retention by 5% can increase profits by 25-95%.
How can I increase CLV?
Improve customer service, create loyalty programs, personalize communications, offer subscriptions, upsell and cross-sell related products, and proactively address customer concerns before they churn.