Customer Lifetime Value (LTV) Calculator
Customer lifetime value (LTV or CLV) is the total gross profit you expect from an average customer over their whole relationship with you. It's the number your acquisition cost has to beat.
Your details
- Lifetime revenue
- $1,200.00
Formula
LTV = average monthly revenue × gross margin × average customer lifespan in months. Lifespan is often estimated as 1 ÷ monthly churn rate.
How it works
LTV rewards retention and margin, not just price. A customer who stays twice as long is worth twice as much for the same acquisition cost — which is why reducing churn is often the highest-leverage growth move.
Frequently asked questions
How do I estimate customer lifespan?⌄
A common shortcut is 1 ÷ your monthly churn rate. If 4% of customers leave each month, the average lifespan is about 25 months.
Should LTV use revenue or profit?⌄
Use gross profit (revenue × gross margin) for a truer figure. Revenue-only LTV overstates value because it ignores the cost of serving customers.
What's a good LTV:CAC ratio?⌄
Around 3:1 is a widely cited healthy target — you earn about three dollars of lifetime value for every dollar spent acquiring a customer.
Sources & methodology
Monthly revenue × gross margin × lifespan (months). A simplified model; excludes discounting of future cash flows and expansion revenue.
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