Finance calculator
Customer Lifetime Value Calculator
Use this customer lifetime value calculator to estimate how much gross profit a customer may represent over an average lifetime using revenue, margin, and churn assumptions. The result is a planning estimate, not a guarantee, and should be compared with CAC, retention trends, cohort data, payback period, and customer quality.
What's a good LTV:CAC ratio?
See the benchmark bands (3:1 healthy, 4:1 strong) and industry targets in the LTV:CAC ratio guide.
How to use this calculator
- Enter average monthly revenue per account, gross margin percentage, and monthly churn percentage.
- Read customer lifetime as a simple inverse of monthly churn, not a precise forecast for every customer.
- Use CLV as a directional business metric and compare it with CAC, retention trends, and margin quality.
Formula
- Estimated customer lifetime in months = 1 / monthly churn rate
- Monthly gross profit per account = average revenue per account x gross margin
- CLV = monthly gross profit per account x estimated customer lifetime
Example calculation
If average revenue is $200 per month, gross margin is 80%, and monthly churn is 4%, estimated customer lifetime is 25 months and CLV is about $4,000.
How to interpret the results
- Use CLV as a directional estimate and compare it with CAC, gross margin quality, retention trends, and payback period.
- Against CAC, an LTV:CAC ratio around 3:1 is a common healthy benchmark; 4:1 or higher is strong, while under about 3:1 suggests customers cost too much to acquire for the value they return.
- Small churn changes can create large CLV changes, so test conservative churn assumptions before making decisions.
- Cohort data, contract length, customer segment, and retention history usually provide stronger context than one simplified inverse-churn estimate.
Frequently asked questions
What happens if churn is zero?
A zero churn input implies an unlimited lifetime in this simple formula, so the calculator asks for a positive churn rate to estimate CLV.
Is this revenue CLV or profit CLV?
This calculator estimates gross-profit-based CLV because it applies gross margin to average revenue.
Should CLV be compared with CAC?
Many teams compare CLV with customer acquisition cost, but both metrics depend on assumptions and should be interpreted carefully.
Why is inverse churn only a simplified estimate?
It assumes churn behaves evenly over time. Real customer retention often varies by cohort, contract type, customer segment, onboarding quality, and product maturity.
Can a small churn change have a large CLV impact?
Yes. Because this formula divides by churn rate, small changes in churn assumptions can produce large differences in estimated lifetime and CLV.
Planning disclaimer
MoneyHackWise calculators are for general informational and planning purposes only and do not provide financial, investment, tax, legal, accounting, lending, or business advice. Results are estimates based on the inputs and assumptions shown.
Related guides
- How to Compare CAC and CLV — A practical guide to comparing customer acquisition cost and customer lifetime value using payback, margin, churn, and scenario assumptions.
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