About the Customer Lifetime Value (CLV) Calculator
Customer lifetime value estimates the total gross profit a typical customer brings in. This CLV calculator multiplies average order value by orders per customer per year to get annual revenue per customer, then by average lifespan in years to get lifetime revenue. Multiplying lifetime revenue by your gross margin gives CLV in profit terms.
It also shows the maximum CAC you could pay while keeping a 3:1 ratio of lifetime value to acquisition cost, a widely used rule of thumb. Using profit rather than revenue matters, because revenue-based LTV can make expensive acquisition look affordable. Base the inputs on real customer data where possible, and recalculate as retention changes. Calculations stay in your browser.
How to use it
- Enter average order value and orders per customer per year.
- Add average customer lifespan in years.
- Enter your gross margin.
- Use CLV and the max CAC figure to guide acquisition spend.
Frequently asked questions
How do you calculate customer lifetime value?
A simple method is average order value × purchases per year × years as a customer × gross margin. With ₹1,800 orders, 3 orders a year, 2.5 years and 45% margin, CLV is about ₹6,075 in gross profit. Segment by channel where possible.
Why use gross margin in CLV?
Revenue is not what you keep. Multiplying by gross margin turns lifetime revenue into lifetime gross profit, which is the money available to cover acquisition and other costs. Comparing revenue-based LTV with CAC can overstate profitability. Keep the margin up to date.
How do I estimate customer lifespan?
Use your own repeat-purchase or churn data. For subscriptions, lifespan is roughly 1 divided by the annual churn rate. For retail, look at how long customers keep buying in your order history. New businesses should start conservatively. Revisit it yearly.