Customer lifetime value (CLV) calculator
Enter average revenue per account, gross margin, and churn. The calculator returns CLV using gross profit rather than revenue, which is the step most CLV estimates skip — and the reason many companies overspend on acquisition.
Your numbers
Monthly recurring revenue per customer.
Revenue minus the cost of delivering the service — hosting, support, delivery.
Percentage of customers lost per month.
Fully loaded cost to acquire one customer, including sales and marketing.
Customer lifetime value
$40,000
Based on gross profit, not revenue — average lifespan 50 months
- LTV:CAC ratio
- 5.0:1
- CAC payback period
- 10 months
- Monthly gross profit / account
- $800
- Revenue-based CLV (overstated)
- $50,000
Formula
How the calculation works
CLV = (ARPA × Gross margin %) ÷ Churn rateUsing gross margin rather than raw revenue is essential. At an 80% margin, a revenue-based CLV overstates value by 25%; at 70% it overstates by roughly 43%. That error propagates straight into acquisition budgets.
Getting it right
What most people get wrong
Churn has more leverage than price
Because churn sits in the denominator, it dominates the result. Halving churn doubles CLV, while a 10% price increase raises it by 10%. When both are available, retention is almost always the higher-return investment — and it compounds, whereas a price rise is a one-time step.
The formula assumes churn never changes
Dividing by a single churn rate assumes year-five churn matches year-one. In reality churn usually declines with tenure as customers embed the product, which makes this formula conservative for products with strong retention. For a more accurate figure, project by cohort rather than using one divisor.
It also ignores expansion entirely
For businesses with NRR above 100%, cohort revenue grows faster than it decays, and CLV is theoretically unbounded. Rather than reporting an infinite value, cap the projection at a defensible horizon — three to five years is common — and state the assumption.
Segment it or it will mislead you
A blended CLV can justify acquisition spend that is profitable on average while losing money in the specific segment you are actually buying. Segment-level CLV routinely changes channel decisions in a way the blended figure never surfaces.
FAQ
Questions, answered
How do you calculate customer lifetime value?+
Multiply average revenue per account by gross margin to get gross profit per period, then divide by the churn rate for that same period. Using gross margin rather than raw revenue is essential — a revenue-based figure materially overstates value and leads to overspending on acquisition.
What is a good LTV to CAC ratio?+
3:1 is the widely used benchmark. Below 1:1 you lose money on every customer. Above 5:1 often signals under-investment in growth — you could likely spend more acquiring customers and remain profitable.
Why use gross margin instead of revenue in CLV?+
Because revenue is not what you keep. If delivering a dollar of service costs thirty cents, a revenue-based CLV overstates the customer's value by roughly 43%, and that error flows directly into how much you are willing to spend acquiring them.
What is the difference between CLV, CLTV, and LTV?+
They are the same metric under different abbreviations. CLV and CLTV are more common in customer success and marketing; LTV is more common in finance and venture contexts, usually paired with CAC.
Keep going
Related tools and definitions
Other calculators
Churn rate calculator
Calculate customer churn rate and retention rate for any period, with the annualized equivalent and benchmark context for B2B SaaS.
NRR calculator
Calculate net revenue retention and gross revenue retention from starting MRR, expansion, contraction, and churn — with benchmark context for B2B SaaS.
Your next account move is already in the signals
The number is the easy part.
Aartha shows you which accounts are moving it, and the cited evidence behind why.