Customer Lifetime Value Calculator
Choose subscription or repeat purchases, enter your figures and see the lifetime value, the ratio to your acquisition cost and how long it takes to earn that cost back.
Worked examples
A subscription
£30 a month, 4% lost each month, 70% margin, £150 to win a customer
Stays 25 months, lifetime value £525, ratio 3.5 to 1, payback 7.1 months
Monthly gross profit is £21, and £525 is 25 times that.
Repeat purchases
£60 order, 2 orders a year, 3 years, 50% margin, £40 to win a customer
6 orders, revenue £360, lifetime value £180, ratio 4.5 to 1
Each order earns £30 in gross profit, so the £40 cost is earned back in 1.3 orders.
About Customer Lifetime Value Calculator
Customer lifetime value, often shortened to LTV, is the profit you can expect from one customer over the whole time they stay with you. It matters because it sets how much you can afford to spend to win each one. A business that earns £400 over a customer's life can spend far more on marketing than one that earns £60, even if both sell for the same price.
For a subscription, the calculator divides the monthly gross profit per customer by the monthly loss rate, because on average a customer stays for one divided by that rate in months. For repeat purchases it multiplies average order, orders a year and years retained, then applies your margin. It then compares the value with what it costs to win a customer, shows the ratio (many businesses aim for about 3 to 1 or better) and tells you how long it takes to earn the cost back.
How to use Customer Lifetime Value Calculator
- Choose subscription or repeat purchases.
- Enter the figures for that kind of business, then your gross margin.
- Enter what it costs to win a customer, including advertising and sales time.
- Read the lifetime value, the ratio to your cost and the payback time.
Common uses
- Setting a sensible limit on advertising spend per customer
- Comparing the value of customers from different sources
- Judging whether a loss rate is affordable
- Preparing figures for a business plan
Frequently asked questions
Why use gross profit and not revenue?
Because revenue ignores what it costs you to deliver. A customer who spends £1,000 on products that cost you £800 is worth £200 to your business, not £1,000.
How does the loss rate set the lifetime?
If you lose 4% of customers each month, the average stay is 1 divided by 0.04, which is 25 months. Halving the loss rate doubles the lifetime and the value.
What is a good LTV to cost ratio?
A common rule of thumb is at least 3 to 1. Much lower and growth may not pay, and much higher may mean you are not investing enough to grow. It depends on your cash position and margins.
What is payback time?
It is how long a customer takes to earn back the cost of winning them. A short payback frees cash to win more customers, so it matters when money is tight.
How reliable is the figure?
It is an estimate that rests on the loss rate and margin you enter. Use real figures from the last few months and treat the result as a guide, not a promise.