Customer Lifetime Value (CLV) Calculator
Customer lifetime value (CLV) is the total gross profit you expect to earn from a customer over the whole of their relationship with you. It tells you how much a customer is really worth, which in turn tells you how much you can afford to spend to acquire one. This calculator builds CLV from purchase value, frequency, lifespan, and gross margin, in any currency.
- Lifetime gross profit
- Lifetime cost
- Annual customer value
- $400.00
- Customer lifespan (years)
- 3
- Gross margin
- 60.00%
- CLV
- $720.00
Each customer is worth about 400 in revenue a year, or 720 in gross profit across a 3-year relationship. A healthy business keeps customer acquisition cost well below this — aim for a CLV-to-CAC ratio of roughly 3:1.
How it works
A single sale is only part of a customer’s value. Most customers buy repeatedly and stay for years, so their true worth is the stream of purchases across that whole relationship — not just the first transaction. CLV captures this by chaining together four inputs.
Start with the average purchase value and multiply by how many times a customer buys per year to get their annual revenue. Multiply that by the number of years they stay, and you have their lifetime revenue. Finally, multiply by the gross margin to strip out the cost of delivering the product, leaving the lifetime gross profit — the figure that actually lands in your business.
The gross-margin step is what separates a meaningful CLV from a vanity number. A customer who spends a lot but at thin margins is worth far less than the revenue suggests. By working in gross profit, CLV becomes directly comparable to what you spend to win that customer.
The single most important use of CLV is the comparison with customer acquisition cost (CAC). If you spend more to acquire a customer than they will ever return, growth burns cash. The math is currency-agnostic, so switch the currency at the top and the relationships hold.
CLV = Average purchase value × Purchases per year × Customer lifespan in years × (Gross margin % ÷ 100). The first two terms give annual customer value; multiplying by lifespan and margin yields lifetime gross profit.
Worked example
Take a customer who spends 100 per order, buys 4 times a year, stays for 3 years, and sits behind a 60% gross margin. Annual value is 100 × 4 = 400. Across 3 years that is 1,200 in lifetime revenue. Applying the 60% margin, CLV = 1,200 × 0.60 = 720 in gross profit. If acquiring that customer costs 240, the CLV-to-CAC ratio is 3:1 — right in the healthy zone.
Things to watch out for
This simple model assumes steady spending, constant retention, and a fixed margin, which real cohorts rarely follow. It also ignores the time value of money: a discounted CLV applies a discount rate so profit earned in year three counts for less than profit today. For subscription businesses, lifespan is often estimated as 1 ÷ annual churn rate. And CLV is only half the story — always pair it with CAC, since a high CLV financed by an even higher acquisition cost still loses money.
Frequently asked questions
Why use gross margin instead of revenue?+
Revenue overstates a customer’s worth because it ignores the cost of serving them. Multiplying by gross margin converts lifetime revenue into lifetime gross profit, which is what you can actually reinvest or compare against acquisition cost.
What is a good CLV-to-CAC ratio?+
A widely cited benchmark is about 3:1 — a customer worth roughly three times what you spent to acquire them. Much lower and growth is unprofitable; much higher may mean you are underinvesting in acquisition.
How do I estimate customer lifespan?+
For subscription businesses, a common estimate is 1 divided by your annual churn rate — a 25% churn implies a 4-year average lifespan. For transactional businesses, use historical retention data on how long customers keep buying.
Should CLV be discounted?+
For longer horizons, yes. A discounted CLV applies a discount rate so future profit is worth less than present profit, giving a more conservative and financially accurate figure. This calculator shows the undiscounted version.
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Disclaimer: This calculator is for educational and informational purposes only and provides estimates, not financial advice. Interest rates, taxes, fees, and local rules vary and change over time. Confirm figures with a qualified professional before making any financial decision.
Last reviewed: 2026-06-22