Customer Lifetime Value Calculator
Calculate customer lifetime value (CLV / LTV) from average revenue, gross margin, and churn, including the average customer lifespan.
How to use this tool
- Enter the average revenue one customer generates per period.
- Enter your gross margin (or 100% for a revenue-based LTV).
- Enter your churn rate per period, in the same time unit as the revenue.
- Read the lifetime value, average lifespan, and gross margin per period.
Estimate how much profit an average customer is worth over their lifetime. Enter average revenue per period, gross margin, and churn rate to get LTV and the average customer lifespan it implies.
Formula
LTV = (Average revenue per period × Gross margin) ÷ Churn rate
Equivalently: Gross margin per period × Average lifespan, where Average lifespan = 1 ÷ Churn rate.
For a customer paying $100/month at 80% gross margin with 5% monthly churn: margin per period = $80, lifespan = 20 months, LTV = $1,600.
How it works
Customer lifetime value (CLV or LTV) estimates the total profit an average customer generates over their entire relationship with you. This calculator uses the standard subscription form: the gross margin a customer contributes each period, multiplied by their expected lifespan. Lifespan is taken as the reciprocal of the churn rate (1 ÷ churn), so a 5% periodic churn implies a 20-period average life. Applying gross margin rather than raw revenue keeps the figure honest — it counts money you actually keep after the cost of serving the customer.
The model assumes a roughly constant churn rate and no discounting of future cash flows; for longer-lived, higher-value customers, finance teams sometimes add a discount rate to compute a present value, which lowers LTV. It also assumes revenue per customer is stable — it does not separately model expansion or contraction over time. Set gross margin to 100% if you deliberately want a revenue-based LTV, but pair it with a revenue-based (not margin-based) comparison when you feed it into an LTV:CAC ratio.
Reviewed by the AbraCalc Business Desk. Educational estimate only, not financial advice; use churn and margin measured the same way your business reports them.
Worked example
$100/mo, 80% margin, 5% monthly churn
- Gross margin per period = 100 × 80% = 80.
- Average lifespan = 1 ÷ 0.05 = 20.00 periods.
- LTV = 80 × 20 = 1,600.
Customer lifetime value = $1,600.00 over 20.00 periods
LTV at $80 gross margin/period by churn rate
| Monthly churn | Avg lifespan (months) | LTV |
|---|---|---|
| 1% | 100.00 | $8,000.00 |
| 2% | 50.00 | $4,000.00 |
| 3% | 33.33 | $2,666.67 |
| 5% | 20.00 | $1,600.00 |
| 8% | 12.50 | $1,000.00 |
| 10% | 10.00 | $800.00 |
| 20% | 5.00 | $400.00 |
Key terms
- Customer lifetime value (LTV/CLV)
- The total gross-margin profit expected from an average customer over their whole relationship.
- ARPA
- Average revenue per account (or per customer) in one period.
- Gross margin
- Revenue minus the direct cost of serving the customer, as a percentage of revenue.
- Average lifespan
- How many periods a customer stays, approximated as 1 divided by the churn rate.
Frequently asked questions
- Why divide by churn rate?
- The average customer lifespan is approximately the reciprocal of the churn rate. A 5% periodic churn means a customer stays about 1 ÷ 0.05 = 20 periods on average, so multiplying periodic margin by that lifespan gives lifetime value.
- Should I use revenue or gross margin?
- Gross-margin LTV is the more defensible number because it reflects profit you keep after serving the customer. Use revenue (100% margin) only when you specifically want a revenue-based figure, and keep comparisons consistent.
- Does this account for discounting?
- No. This is the simple, undiscounted LTV. For long-lived, high-value customers you may want to discount future periods to present value, which produces a lower, more conservative LTV.