Customer Lifetime Value Calculator
Valuation Analysis
What Is Customer Lifetime Value?
Customer Lifetime Value is the total value a customer brings to your business during their entire relationship with you.
Not just one purchase.
Not just one month.
The full journey.
Depending on how you calculate it, LTV can mean:
- Gross Revenue LTV: Total money a customer pays you.
- Net (Profit) LTV: What you actually keep after costs.
Your calculator focuses on Net LTV, which is the number that truly matters.
Why Customer Lifetime Value Matters
LTV is not a vanity metric. It is a decision metric.
Here’s what it helps you do:
- Know how much you can afford to spend to acquire customers
- Identify whether your business model is sustainable
- Compare customer segments or pricing plans
- Spot problems with churn before they become fatal
If you do not understand your LTV, you are guessing. And guessing gets expensive fast.
What This Customer Lifetime Value Calculator Does
The calculator you shared is built for clarity and speed.
It answers three core questions:
- How long does the average customer stay?
- How much revenue do they generate in that time?
- How much profit does that revenue produce?
Optionally, it also tells you whether your acquisition cost (CAC) makes sense.
Inputs Explained in Plain English
Let’s walk through each input field and what it really means.
1. Average Monthly Revenue (ARPU)
This is the average amount one customer pays you per month.
Examples:
- A $29 SaaS plan → ARPU = 29
- An ecommerce store where customers spend $60/month → ARPU = 60
Tip: Use an average across all customers, not your best ones.
2. Monthly Churn Rate (%)
Churn is the percentage of customers who leave each month.
If 5 out of 100 customers cancel every month, your churn rate is 5%.
This number has a massive impact on LTV. Small churn improvements often create huge gains.
3. Gross Margin (%)
Gross margin is how much of your revenue you keep after direct costs.
Examples:
- SaaS businesses often have 70–90% margins
- Physical products may be 30–60%
If you are unsure, 80% is a reasonable default for many digital products.
4. Customer Acquisition Cost (CAC) (Optional)
CAC is what you spend to acquire one customer.
This can include:
- Ads
- Sales salaries
- Marketing tools
- Agency fees
The calculator uses CAC to compute the LTV to CAC ratio, which is a key health metric.
How the Calculator Works (The Math Behind It)
The calculator uses a clean and widely accepted formula.
Step 1: Estimate Customer Lifespan
Average Lifespan (months) = 1 ÷ Monthly Churn Rate
Example:
- Churn = 5% → 0.05
- Lifespan = 1 ÷ 0.05 = 20 months
Step 2: Calculate Gross Revenue LTV
Gross LTV = ARPU × Customer Lifespan
Example:
- ARPU = $50
- Lifespan = 20 months
- Gross LTV = $1,000
Step 3: Calculate Net (Profit) LTV
Net LTV = Gross LTV × Gross Margin
Example:
- Gross LTV = $1,000
- Margin = 80%
- Net LTV = $800
This is the number that shows up as Net Lifetime Value in the calculator.
Step 4 (Optional): LTV to CAC Ratio
LTV to CAC Ratio = Net LTV ÷ CAC
This ratio tells you if growth is healthy.
- Below 1:1 → You lose money on every customer
- 1:1 to 3:1 → Tight margins
- 3:1 or higher → Healthy unit economics
The calculator clearly labels these outcomes so there’s no guesswork.
What Makes This Calculator Useful
This calculator avoids common mistakes:
- It uses churn-based lifespan, not guesswork
- It separates gross revenue from profit
- It shows results in human-friendly language
- It flags bad economics instead of hiding them
It is fast enough for quick checks and accurate enough for planning.
When You Should Use a Customer Lifetime Value Calculator
Use it when:
- Setting or adjusting ad budgets
- Evaluating a new pricing plan
- Comparing customer segments
- Pitching investors
- Diagnosing why growth feels “off”
If you run paid acquisition without knowing LTV, you are flying blind.
Common Mistakes to Avoid
- Using revenue instead of profit
Revenue feels good. Profit keeps the business alive. - Ignoring churn
Churn is the silent killer of LTV. - Overestimating ARPU
Use real averages, not ideal customers. - Treating LTV as a fixed number
LTV changes as your product, pricing, and retention change.