Customer Lifetime Value Calculator

Estimate customer lifetime value from order value, purchase frequency, years retained and gross margin.

Customer lifetime value
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Lifetime revenue
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A simple estimate based on averages; real customers vary.

In short

What is the Customer Lifetime Value Calculator?

Customer lifetime value, or LTV, estimates the gross profit one customer brings over the whole time they stay. This version multiplies average order value, orders per year and years retained, then applies your gross margin. Use it to judge how much you can sensibly spend to win a customer.

How it works

Lifetime revenue = average order value x orders per year x years retained. LTV = lifetime revenue x gross margin %. It assumes steady behaviour and no discounting of future years, so treat it as a simple planning estimate.

How to use it

  1. Enter the average order value.
  2. Enter how many orders a customer places per year.
  3. Enter the average years a customer stays.
  4. Enter your gross margin and read the lifetime value.
Questions

Customer Lifetime Value Calculator — FAQ

Where do I find years retained?

Look at your customer records to see how long customers keep buying, or divide one by your yearly churn rate for a rough figure.

Why use gross margin?

Revenue overstates what a customer is worth. Gross margin shows the profit left after the direct cost of delivering the product or service.

Is this accurate for new businesses?

Less so, because there is little history. Revisit the inputs as real repeat-purchase data builds up.

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