Sales and growth
Customer lifetime value calculator
Work out what a customer is worth over time, and whether you are paying too much to win them.
Estimate the gross profit a typical customer brings in over their lifetime with you. Add what it costs to win a customer to see the CLV to CAC ratio and how many months it takes to earn that cost back.
You will need
- Average purchase value and how often customers buy
- Gross margin
- How long customers typically stay
- Optional: cost to win a customer
What you enter
- Average purchase value (ex GST) – Average revenue from one purchase.
- Purchases per customer per year – How often a typical customer buys from you in a year.
- Gross margin – Share of each sale you keep after direct costs.
- Years a typical customer stays – If you know your yearly retention rate, lifespan ≈ 1 ÷ (1 − retention). 80% retention ≈ 5 years.
- Cost to win a customer (optional) – Marketing and sales spend ÷ new customers. Adds the CLV to CAC ratio and payback.
How it is calculated
Yearly revenue per customer = Average purchase × Purchases per year. Yearly gross profit = Yearly revenue × Gross margin. Lifetime value (CLV) = Yearly gross profit × Lifespan. CLV : CAC = CLV ÷ Acquisition cost. Payback = Acquisition cost ÷ (Yearly gross profit ÷ 12), in months.
Assumptions
- Customers spend the same each year for their whole lifespan.
- CLV is measured in gross profit, not revenue, and is not discounted for the time value of money.
- Amounts exclude GST.
Limitations
- Averages hide big differences between customer groups. Work it out for your best and typical customers separately.
- Lifespan is the hardest number to know; try a cautious figure too.