Customer Lifetime Value Calculator

Estimate the gross profit a customer generates over their whole relationship with the business.

About Customer Lifetime Value Calculator

Expected lifetime is the reciprocal of the churn rate, so 2% monthly churn implies a 50-month life. Multiplying by gross profit rather than revenue is what makes LTV comparable with acquisition cost, and the discounted variant accounts for cash arriving years out. LTV computed on revenue rather than gross profit overstates the value of a customer by the whole cost of serving them, which is how unprofitable growth gets funded.

Formula

Customer Lifetime Value

LTV = average revenue × gross margin ÷ monthly churn rate

churn: Monthly probability a customer leaves
gross margin: Share of revenue left after the cost of serving the customer

Worked example

With the default values below, Customer Lifetime Value Calculator returns Customer Lifetime Value of $3,900.00. Change any input above and every figure here is recalculated in your browser.

Inputs used

Average revenue per customer per monthminimum 0: 100
Gross marginaccepts 0–100 %: 78 %
Monthly churn rateaccepts 0–100 %: 2 %
Annual discount rateaccepts 0–100 %: 10 %

Results

Customer Lifetime Value: $3,900.00
Expected Customer Lifetime: 50.0 months
Gross Profit per Month: $78.00
Discounted Lifetime Value: $2,752.94
Undiscounted Lifetime Revenue: $5,000.00

Step by step

1Values used
2Customer Lifetime Value
3Customer Lifetime Value= 3,900.00
4Expected Customer Lifetime= 50.0 months
5Gross Profit per Month= 78.00
6Discounted Lifetime Value= 2,752.94
7Undiscounted Lifetime Revenue= 5,000.00

Assumptions and limits

The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
In particular, this calculator does not take inflation, tax or fees or charges 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 = average revenue × gross margin ÷ monthly churn rate Expected lifetime is the reciprocal of the churn rate, so 2% monthly churn implies a 50-month life. Multiplying by gross profit rather than revenue is what makes LTV comparable with acquisition cost, and the discounted variant accounts for cash arriving years out.

Why does Customer Lifetime Value matter?

LTV computed on revenue rather than gross profit overstates the value of a customer by the whole cost of serving them, which is how unprofitable growth gets funded.

What values do I need to enter?

This calculator takes 4 inputs: Average revenue per customer per month, Gross margin, Monthly churn rate, Annual discount 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.