Customer Lifetime Value Calculator
What one customer is really worth, in gross profit.
Customer lifetime value
Estimates for planning only, not financial advice.
Customer lifetime value is the total gross profit one customer generates before churning: average revenue per period times gross margin times expected lifetime. At $50 a month, 70% margin, and 5% monthly churn, expected lifetime is 20 months and CLTV is $700. Against a $125 acquisition cost, the LTV-to-CAC ratio is 5.6 to 1 with a 3.6-month payback. This calculator runs the full unit-economics stack from four inputs.
How to Use This Calculator
Enter average monthly revenue per customer (ARPA), gross margin after direct service costs, and the monthly churn rate as a percentage. Add your fully loaded customer acquisition cost for the ratio and payback math. The results show CLTV, expected lifetime in months, the LTV-to-CAC ratio with a health verdict, and the payback period. Segment the inputs by cohort when you can: blended averages hide the segments worth doubling down on.
Enter ARPA, gross margin, and monthly churn. Use gross profit, never raw revenue.
Add fully loaded CAC: ads, salaries, commissions, and tools, not just media spend.
Read CLTV, the ratio, and payback. If the ratio is healthy but payback exceeds 12 months, growth will still strain cash.
The CLTV Formulas
The 1/churn lifetime assumes churn is constant, which makes it a planning approximation, not a prophecy. Early-tenure churn is usually higher than late-tenure churn, so real lifetimes often exceed the formula for mature cohorts and fall short for new ones. Cohort analysis fixes this: compute CLTV per acquisition cohort and watch it improve as onboarding gets better. The payback formula is equally important: it tells you how long each customer is a cash drain before turning profitable.
Worked Example
A SaaS business charges $50 per customer per month with 70% gross margin, so each customer contributes $35 of monthly gross profit. Monthly churn is 5%, giving an expected lifetime of 1 / 0.05 = 20 months. CLTV = $35 x 20 = $700. With a $125 CAC, the LTV-to-CAC ratio is 5.6 to 1, excellent, and payback is $125 / $35 = 3.6 months. Now cut churn to 3%: lifetime becomes 33.3 months, CLTV rises to $1,167, the ratio hits 9.3 to 1. That single retention improvement is worth $467 per customer across the whole base, which is why churn work beats acquisition work on ROI.
Levers That Move CLTV
| Lever | Mechanism | Typical impact |
|---|---|---|
| Reduce churn | Longer lifetime multiplies everything | Highest ROI lever available |
| Raise prices / upsell | Higher ARPA per period | Expansion revenue compounds |
| Improve gross margin | More profit per revenue dollar | Automation, self-serve support |
| Lower CAC | Does not raise CLTV, but lifts the ratio | Cheaper channels, referrals |
Note the asymmetry: the first three levers raise CLTV itself, while cheaper acquisition only improves the ratio. Both matter, but a business with $1,400 CLTV and $300 CAC is fundamentally stronger than one with $400 CLTV and $80 CAC at the same 4.7 ratio, because the absolute profit per customer funds more mistakes. For the inputs behind this math, our churn rate calculator derives churn from customer counts, our CAC calculator builds acquisition cost properly, and our contribution margin calculator sharpens the margin input.
Estimates for planning only, not financial advice.
Frequently Asked Questions
What is customer lifetime value (CLTV)?
Customer lifetime value is the total gross profit you expect from one customer over the entire relationship. At $50 monthly revenue, 70% gross margin, and 5% monthly churn, each customer is worth $50 x 0.70 / 0.05 = $700. It is the "value" half of the value-vs-cost equation: compare it to acquisition cost to judge whether growth is profitable.
What is the CLTV formula?
The standard formula is CLTV = average revenue per period x gross margin x (1 / churn rate). The 1/churn term is the expected customer lifetime in periods. With $50 monthly ARPA, 70% margin, and 5% monthly churn, lifetime is 20 months and CLTV is $35 x 20 = $700. For annual contracts, use annual revenue and annual churn instead.
What is the difference between CLV, CLTV, and LTV?
Nothing meaningful: customer lifetime value, customer lifetime value, and lifetime value are the same metric with different abbreviations. Some teams distinguish "CLV" (revenue-based) from "CLTV" (profit-based), but the profit-based version is the standard. Whatever you call it, always use gross profit, not revenue, or the number overstates value.
Should CLTV use revenue or profit?
Profit, specifically gross profit after the direct costs of serving the customer. A $50 customer at 70% margin contributes $35 a month; using the full $50 overstates value by 43% and makes every acquisition look brilliant. Subtract cost of goods, hosting, support, and payment processing. Sales and marketing costs stay out: they belong on the CAC side of the comparison.
What is a good LTV to CAC ratio?
Three to one or better is the classic healthy benchmark: each customer returns three times their acquisition cost. Below 1:1 destroys value with every sale. Above 5:1 suggests under-investment in growth. The ratio and the payback period travel together: a great ratio with a 24-month payback still strains cash flow, because you fund two years of cost before breaking even.
How does churn change CLTV?
Inversely and powerfully. Halving churn doubles expected lifetime and therefore doubles CLTV, with no new customers required. At 5% monthly churn the $50/70% customer is worth $700; at 2.5% churn the same customer is worth $1,400. Retention improvements are usually the highest-ROI lever in the business because they multiply the value of the entire installed base.
What is predictive vs historical CLTV?
Historical CLTV sums what past cohorts actually generated: accurate but backward-looking. Predictive CLTV models what current customers will generate using churn curves and spending trends: forward-looking but assumption-heavy. Use historical for reporting and predictive for decisions like acquisition budgets and retention offers. Reconcile them quarterly; persistent gaps mean the model is wrong.
How do you calculate CLTV for non-subscription businesses?
Use purchase frequency instead of churn: CLTV = average order value x purchase frequency per year x gross margin x average customer lifespan in years. A coffee shop customer spending $6 twice a week at 60% margin for 3 years is worth $6 x 104 x 0.60 x 3 = $1,123. E-commerce businesses often segment this by cohort because early behavior predicts lifespan well.
Does discounting future cash flows matter for CLTV?
For most operating decisions, no: the simple formula is fine and the discount effect is small over typical lifetimes. For high-value B2B customers with multi-year contracts, discounting at your cost of capital is more rigorous. A $10,000 five-year value discounted at 10% is worth about $8,600 today. Use the simple version for dashboards and the discounted version for big contract decisions.
How should CLTV guide marketing spend?
Set acquisition budgets as a fraction of CLTV, not as a gut-feel number. At a 3:1 target ratio, you can spend up to one-third of CLTV to acquire a customer. Segment by channel and cohort: if paid search customers show $900 CLTV and social customers show $400, their budgets should differ accordingly. Never let blended CLTV justify overspending on a weak segment.