How to use the CLV calculator
- Type your Average order value ($), Purchases per year and Gross margin (%). Use margin after the cost of goods sold, and after shipping or payment fees if they grow with each order.
- Under How long customers stay, choose Average lifespan to enter years, or Annual retention rate to enter the percentage of customers who come back each year.
- Enter your Customer acquisition cost, CAC ($) to see the CLV:CAC ratio, net value and payback. Leave it blank to see CLV on its own.
How customer lifetime value is calculated
Annual profit per customer = average order value × purchases per year × gross margin. Customer lifetime value = annual profit × average lifespan in years. With the retention option, lifespan = 1 ÷ (1 − retention), the churn shortcut where churn is 1 − retention. This is the plain, undiscounted version. Wikipedia's CLV article lists the churn-based and discounted formulas that finance teams use.
CLV:CAC = CLV ÷ CAC. CAC payback in months = CAC ÷ (annual profit ÷ 12).
Worked example
The calculator opens with a $75 order, 4 purchases a year, a 40% margin, a 3-year lifespan and a $50 CAC. Annual profit = 75 × 4 × 0.40 = $120.00. CLV = $120.00 × 3 = $360.00, built on $900.00 of lifetime revenue. CLV:CAC = 360 ÷ 50 = 7.20 : 1, net value after CAC is $310.00, and payback is 50 ÷ (120 ÷ 12) = 5.0 months. Switch to a 70% retention rate and lifespan becomes 1 ÷ 0.30 = 3.33 years, so CLV rises to $400.00.
Limits to know about
- A retention rate of 100% means nobody ever leaves, so lifetime value has no limit. The calculator asks for a rate below 100%.
- Nothing is discounted, and order value, frequency and margin are assumed to stay flat. Lifespans beyond 10 years are long extrapolations, so treat them as rough.
- Averages hide differences. Run new and repeat customers, or each acquisition channel, separately.
- CLV here is gross profit, before overhead, support and retention spending.
To find your margin, use the profit margin calculator. To set prices from cost, try the markup calculator. To see how many sales cover fixed costs, open the break-even sales calculator.
Customer lifetime value FAQ
What is a good CLV to CAC ratio?
A ratio of 3:1 or higher is the usual target. David Skok writes that the best SaaS businesses run above 3, sometimes as high as 7 or 8, and he stresses that these are guidelines with exceptions. Below 1:1 you lose money on every customer you win, and a ratio between 1 and 3 leaves a thin cushion.
Should I use customer lifespan or retention rate?
Use lifespan when you can measure it from customer records, such as the average time between a first and last order. Use retention when you track the share of customers who come back each year. The calculator turns retention into a lifespan with 1 ÷ (1 − retention).
Should CLV be based on revenue or profit?
Profit. A revenue-based figure ignores what it costs to make and deliver what you sold, so every customer looks more valuable than they are. This calculator multiplies by gross margin and shows lifetime revenue separately. If shipping, payment fees or support grow with each order, take them out of your margin first.
How can I increase customer lifetime value?
Four inputs move it: order value, purchases per year, gross margin and lifespan. Retention often has the most leverage, because lifespan equals 1 ÷ (1 − retention). Going from 70% to 80% retention lifts lifespan from 3.33 to 5 years, a 50% rise in CLV with nothing else changed.
What is a good CAC payback period?
Skok treats 12 months as the outer limit: profitability is anemic when it takes longer than that to recover CAC. The calculator shows payback as CAC ÷ (annual profit per customer ÷ 12). With the default numbers that is 50 ÷ 10 = 5.0 months.
Sources: David Skok, SaaS Metrics 2.0 (For Entrepreneurs); Customer lifetime value, Wikipedia. Estimates only, not financial advice.