Customer Lifetime Value Calculator

Customer Lifetime Value Calculator can show you how much your customers are worth over their lifetime of doing business with you.

Customer Lifetime Value (CLV) is an important concept because it demonstrates how much a customer is worth to your company while also highlighting how much new customers cost to acquire.  

To determine an accurate CLV, you need to know some numbers like cost of good sold for your product/service, service costs (how much you spend on servicing customers each year, if applicable), and finally, your CAC or Customer Acquisition Cost. 

A simple CLV calculation looks like this (there are several different ways to calculate CLV): 

Profit Per Customer x # of Years as a Customer – Customer Acquisition Cost (CAC)

So, if your profit is $100 per customer and a customer stays with you for 10 years and it cost $100 to acquire that customer (sales and marketing spend), your CLV would be $900. 

The sticky point about CLV is to know how much you “should” spend on acquiring new customers. Companies are often surprised to discover how much their new customers cost and how long it takes to break even much less profit. Typically, companies want to at least break even on the CAC within a year, and a “good” CLV to CAC ratio is 3:1 or higher. Ratios like 5:1 and higher may indicate that the company is not spending enough on acquisition efforts and could likely be acquiring more new customers. 

Without knowing customers’ worth to the organization, it is difficult to ascertain how much you should spend on customer acquisition. Controlling sales and marketing spend is always a challenge, but having a target per new customer is particularly helpful. 

NOTE: If you don’t know your Customer Acquisition Cost (CAC), simply take your sales and marketing spend for the period (i.e. year) and divide by the number of new clients acquired (ex. $100,000 spend/100 customers = $1,000 CAC)

Acceptable CLV rates vary widely by industry and company. These articles provide more information and examples of CLV by industry: 

https://www.propellercrm.com/blog/customer-acquisition-cost

https://www.entrepreneur.com/article/225415