Customer Lifetime Value
Estimate the profit a customer earns over their lifetime.
About Customer Lifetime Value
Monthly churn implies an average lifespan, and multiplying the profitable part of monthly revenue by that lifespan yields the customer's lifetime value. LTV is the fair ceiling for what you can pay to acquire a customer, and comparing it to CAC decides whether marketing widens or narrows the moat.
Formula
Customer Lifetime Value
LTV = ARPU x gross margin% / monthly churn%
- churn
- Share of customers leaving each month
Worked example
With the default values below, Customer Lifetime Value returns Contribution per Month of $31.50. Change any input above and every figure here is recalculated in your browser.
Inputs used
- Average revenue per monthminimum 0
- 45
- Gross marginaccepts 0–100 %
- 70 %
- Monthly churn rateaccepts 0–100 %
- 5 %
Results
- Contribution per Month
- $31.50
- Average Customer Lifespan (months)
- 20.0
- Lifetime Value (LTV)
- $630.00
Step by step
- 1Values used
- 2Customer Lifetime Value
- 3Contribution per Month= 31.50
- 4Average Customer Lifespan (months)= 20.0
- 5Lifetime Value (LTV)= 630.00
Assumptions and limits
- The result is derived only from the 3 inputs listed above. Anything not among them is not part of the calculation.
- In particular, this calculator does not take inflation, tax, fees or charges or compounding frequency into account.
- Figures are rounded for display to 2 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
- This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.
How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.
Frequently Asked Questions
How is Customer Lifetime Value calculated?
LTV = ARPU x gross margin% / monthly churn% Monthly churn implies an average lifespan, and multiplying the profitable part of monthly revenue by that lifespan yields the customer's lifetime value.
Why does Customer Lifetime Value matter?
LTV is the fair ceiling for what you can pay to acquire a customer, and comparing it to CAC decides whether marketing widens or narrows the moat.
What values do I need to enter?
This calculator takes 3 inputs: Average revenue per month, Gross margin, Monthly churn rate. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.