Skip to content
Businesssaas

Customer Lifetime Value Calculator

Lifetime value in undiscounted and discounted form, with the CAC ratio. The undiscounted figure overstates at low churn, because money arriving four years out is not worth its face value today.

Also called: customer lifetime value calculator, clv calculator.

$
%
%
%
%
$
Lifetime value
$200,000.00

$200,000.00 of gross profit over an expected lifetime of 50 months. This is the undiscounted form, which overstates because revenue years out is counted at face value. Enter a discount rate to see the present value. Enter your CAC to see the ratio. At this lifetime value you can afford to spend up to 66666.67 to acquire a customer at a ratio of three.

Expected customer lifetime
50
Discounted lifetime value
$200,000.00
With expansion revenue
$200,000.00
Monthly gross profit
$4,000.00
LTV to CAC
0
CAC payback
0
Most you can afford to acquire a customer
$66,666.67
On discounting
This is the undiscounted form, which overstates because revenue years out is counted at face value. Enter a discount rate to see the present value.
On the ratio
Enter your CAC to see the ratio. At this lifetime value you can afford to spend up to 66666.67 to acquire a customer at a ratio of three.
How this is calculated
Method and background

How this is calculated

Monthly gross profit divided by churn gives the undiscounted lifetime value, since lifetime is the reciprocal of churn. That form is standard and optimistic: at two percent churn the average customer lasts fifty months, and revenue arriving in year four discounts substantially. Adding the discount rate to churn in the denominator handles it in closed form. Expansion revenue works the other way, extending value per customer. The LTV to CAC ratio is what the figure is usually computed for, and three is the conventional target.

discounting adds to the churn rate in the denominator, which is why a long lifetime shrinks so much under it
c
Monthly churn
d
Monthly discount rate

Worked examples

Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.

two percent monthly churn

Average revenue per user, per month
$5,000.00
Gross margin
80%
Monthly churn rate
2%
Annual discount rate
0%
Annual expansion revenue per customer
0%
Customer acquisition cost, if known
$0.00

Lifetime value$200,000.00

4,000 of monthly gross profit over 0.02 churn

Open this example

discounting cuts it substantially

Average revenue per user, per month
$5,000.00
Gross margin
80%
Monthly churn rate
2%
Annual discount rate
12%
Annual expansion revenue per customer
0%
Customer acquisition cost, if known
$60,000.00

Lifetime value$200,000.00

boundary: 4,000 over (0.02 + 0.01), a third below the undiscounted figure

Open this example

Method and limits

What it assumes

  • Constant churn, margin and revenue per customer, none of which hold exactly.

What it deliberately does not model

  • Constant churn overstates, because real cohorts churn fastest early and then stabilise.
  • The undiscounted form is standard in reporting and is not a present value.
  • A high LTV built on a low churn estimate is only as good as that estimate.

Formula version 1.0.0 · definition 1.0.0 · United States · Report a problem with this calculator

Frequently asked questions

Should I discount lifetime value?
For a decision, yes. At two percent churn the average customer lasts over four years, and undiscounted revenue from year four is not worth its face value. For reporting, the undiscounted form is the convention.
What LTV to CAC ratio should I aim for?
Three is the conventional target, with payback inside twelve months. Below one you are paying more to acquire a customer than they will ever be worth.