Customer Lifetime Value Calculator
Find out how much each customer is really worth
Converge Team
Customer Data
Results
Customer Lifetime Value tells you the total revenue a single customer generates over the entire relationship with your business. It is arguably the most important metric for any subscription or recurring-revenue company because it determines how much you can invest in acquiring and retaining customers.
The formula is straightforward: CLV = Average Purchase Value × Purchase Frequency × Customer Lifespan. For SaaS businesses, this simplifies to monthly revenue per customer divided by the monthly churn rate.
According to a study by Bain & Company, a 5% increase in customer retention can increase profits by 25% to 95%. This is because retained customers tend to buy more over time, cost less to serve, and refer new customers. All three effects compound to increase CLV.
The LTV:CAC ratio — lifetime value divided by customer acquisition cost — is the metric investors and growth teams watch most closely. A ratio of 3:1 is considered healthy. Below that, you are spending too much to acquire customers relative to what they are worth. Above 5:1, you may be under-investing in growth.
For support teams, CLV provides the business case for quality service. When you know a customer is worth $5,000 over their lifetime, spending an extra 30 minutes resolving their issue is clearly worthwhile. Without CLV data, support is often treated as a cost center rather than a retention driver. To understand what drives CLV changes, track your churn rate and NPS alongside it.
How to Use This Calculator
- Enter average purchase value: The average amount a customer spends per transaction. For subscriptions, use your monthly plan price.
- Enter purchase frequency: How many times per year the customer purchases. For monthly subscriptions, enter 12.
- Enter customer lifespan: The average number of years a customer stays with you. If you know your monthly churn rate, divide 1 by the churn rate and then by 12.
- Optional — add CAC: Enter your customer acquisition cost to see your LTV:CAC ratio and health assessment.
- Optional — add gross margin: Apply your gross margin percentage for a more accurate profitability picture.
Pro Tips
- Segment by channel: Calculate CLV separately for customers acquired from different sources. Organic search customers often have higher CLV than paid ad customers.
- Factor in expansion revenue: If customers tend to upgrade over time, your CLV calculation should account for increasing average purchase value.
- Use cohort analysis: Group customers by signup month and track their CLV over time. This reveals whether product and support improvements are actually extending customer lifespans.
- Connect support quality to CLV: Track whether customers who interact with support have higher or lower CLV than those who don't. Good support interactions often increase loyalty and spending.
- Update quarterly: Customer behavior changes. Recalculate CLV each quarter and watch for trends in average value, frequency, and lifespan.