Customer Lifetime Value (CLV) Calculator

How to calculate Customer Lifetime Value (CLV) calculator?

Customer Lifetime Value estimates the net revenue a typical customer brings over their relationship with your business using purchase behavior and margins.

Key formula: CLV = (Average Purchase Value × Purchase Frequency per year × Average Customer Lifespan in years × Gross Margin %) − Customer Acquisition Cost (CAC)

Using the Customer Lifetime Value (CLV) calculator calculator: an example

Example values: Average purchase $50, frequency 4/year, lifespan 3 years, gross margin 40%, CAC $20.

Step-by-step calculation:

• Calculate annual customer revenue: $50 × 4 = $200 per year.
• Multiply by lifespan: $200 × 3 = $600 total revenue per customer.
• Apply gross margin: $600 × 0.40 = $240 gross profit per customer.
• Subtract CAC: $240 − $20 = $220 estimated CLV.

Frequently Asked Questions

What does gross margin represent?

Gross margin is the percentage of revenue retained after direct costs of goods sold; use a decimal (for example, 40% = 0.40) in calculations.

Should CAC be included in CLV?

Yes. Subtracting CAC from lifetime gross profit shows the net value a customer contributes after acquisition costs.

How can I improve CLV?

Increase purchase frequency or average order value, improve retention to extend lifespan, or raise gross margins while managing CAC.