Customer Lifetime Value Calculator
Calculate the total value a customer brings to your business over their entire relationship. Know what you can afford to spend on acquisition.
Average order or contract value
How many times per year they buy
Average customer relationship length
Revenue minus cost of goods sold
Understanding Customer Lifetime Value (LTV)
Customer Lifetime Value (LTV or CLV) is a prediction of the total revenue a business can expect from a single customer account throughout their entire relationship. Understanding LTV is crucial for making informed decisions about customer acquisition spending.
Why LTV Matters
- CAC Budgeting: Knowing your LTV helps determine how much you can afford to spend acquiring customers.
- Customer Segmentation: Identify your most valuable customer segments and focus resources accordingly.
- Retention Investment: Justify spending on retention programs that increase customer lifespan.
- Business Valuation: Investors use LTV to evaluate business health and growth potential.
LTV Calculation Methods
Simple Method: Best when you know your average customer lifespan. Multiply average purchase value by purchase frequency and customer lifespan.
Churn-Based Method: Ideal for subscription businesses. Divides average customer value by churn rate to estimate lifespan automatically.
Cohort Analysis: Advanced method that tracks actual customer cohorts over time for more accurate historical data.
LTV Benchmarks by Industry
SaaS (B2B)
LTV:CAC ratio of 3:1 or higher is considered healthy
E-commerce
Varies widely; repeat purchase rate is key driver
Subscription Services
Monthly value / monthly churn rate = LTV
Professional Services
Often 3-5x annual contract value
How to Increase Customer LTV
- Reduce Churn: Improve product, customer success, and support to keep customers longer.
- Increase Purchase Frequency: Encourage repeat purchases through loyalty programs and engagement.
- Upsell and Cross-sell: Expand average purchase value with complementary products or premium tiers.
- Improve Onboarding: Strong onboarding increases engagement and reduces early churn.
- Build Relationships: Personal relationships create switching costs and increase loyalty.
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