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Lifetime Value (LTV) Calculator

Calculate customer lifetime value from margin, churn and discount rate.

About Lifetime Value (LTV) Calculator

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.

Formula

Lifetime Value (LTV)

Discounted LTV = monthly gross profit ÷ (net churn rate + discount rate)

net churn
Gross churn less revenue expansion from existing customers
discount rate
Time value of money, which caps LTV for very low churn rates

Worked example

With the default values below, Lifetime Value (LTV) Calculator returns Discounted Lifetime Value of $2,367.86. Change any input above and every figure here is recalculated in your browser.

Inputs used

Monthly revenue per customerminimum 0
85
Gross marginaccepts 0–100 %
78 %
Monthly churn rateaccepts 0.01–100 %
2.5 %
Monthly discount rateaccepts 0–10 %
0.8 %
Monthly revenue expansionaccepts 0–20 %
0.5 %

Results

Discounted Lifetime Value
$2,367.86
Simple Lifetime Value
$3,315.00
Average Customer Lifetime
50.00 months
Monthly Gross Profit per Customer
$66.30
Net Churn After Expansion
2.000%

Step by step

  1. 1Values used
  2. 2Lifetime Value (LTV)
  3. 3Discounted Lifetime Value= 2,367.86
  4. 4Simple Lifetime Value= 3,315.00
  5. 5Average Customer Lifetime= 50.00 months
  6. 6Monthly Gross Profit per Customer= 66.30
  7. 7Net Churn After Expansion= 2.000

Assumptions and limits

  • The result is derived only from the 5 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 3 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 Lifetime Value (LTV) calculated?

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.

Why does Lifetime Value (LTV) matter?

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.

What values do I need to enter?

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.

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