Calculate customer lifetime value from margin, churn and discount rate.
Including a discount rate prevents LTV becoming implausibly large at low churn, since revenue years away is worth less today. Expansion revenue reduces net churn and can raise LTV substantially. Undiscounted LTV at one per cent monthly churn implies a hundred month relationship, which few businesses can evidence and no investor will accept at face value.
Lifetime Value (LTV)
Discounted LTV = monthly gross profit ÷ (net churn rate + discount rate)
Discounted LTV = monthly gross profit ÷ (net churn rate + discount rate) Including a discount rate prevents LTV becoming implausibly large at low churn, since revenue years away is worth less today. Expansion revenue reduces net churn and can raise LTV substantially.
Undiscounted LTV at one per cent monthly churn implies a hundred month relationship, which few businesses can evidence and no investor will accept at face value.
This calculator takes 5 inputs: Monthly revenue per customer, Gross margin, Monthly churn rate, Monthly discount rate, Monthly revenue expansion. The pre-filled defaults are a realistic starting point — replace them with figures from your own environment for a result you can act on.