Customer Lifetime Value (CLTV) Calculator
Enter your revenue and cost metrics to find out how much a single customer is worth over their entire relationship with your business. Choose the Simple model for e-commerce or retail, the SaaS model for subscription businesses, or the Discounted model to account for the time value of money. The calculator also works out your CLV to CAC ratio and how many months it takes to recover acquisition costs.
Formula
Worked example
SaaS example: ARPU = $99/mo, gross margin = 70 %, monthly churn = 2.5 %. Monthly gross contribution = 99 x 0.70 = $69.30. Average lifespan = 1 / 0.025 = 40 months. CLTV = 69.30 / 0.025 = $2,772. With CAC = $150, CLV:CAC = 2,772 / 150 = 18.5x.
What is Customer Lifetime Value (CLTV)?
Customer Lifetime Value (CLTV), also written CLV or LTV, is the total gross profit a business expects to earn from a single customer over the entire duration of their relationship. It answers the fundamental question of how much a new customer is actually worth. A business whose CLTV is higher than its Customer Acquisition Cost (CAC) is profitable at the unit level; one where the ratio is inverted is effectively paying customers to buy from them. CLTV matters because decisions about marketing budgets, pricing, retention programs and product investment all ultimately flow from how long customers stay and how much they spend.
Which model should I use?
The Simple model (AOV x Purchase Frequency x Lifespan x Gross Margin) works well for retail, e-commerce, and any business with discrete transactions. You supply the average order value, how often customers buy in a year, and how many years they typically remain a customer. The SaaS model uses the classic formula for recurring revenue businesses: monthly ARPU multiplied by gross margin, divided by the monthly churn rate. Because the average customer lifespan equals 1 / churn rate, a business with 2 % monthly churn has customers who stay an average of 50 months. The Discounted model is the same SaaS formula with a discount rate added to the denominator, which converts future cash flows back to present value using the concept that a dollar received in the future is worth less than a dollar today. It is most useful for financial modeling and investor reporting where WACC-adjusted figures are expected.
CLV:CAC ratio and payback period
The CLV to CAC ratio is the most widely used health metric for growth-stage businesses. A ratio of 3:1 is the commonly cited minimum target in SaaS (meaning you earn three dollars of lifetime value for every dollar spent acquiring a customer), though highly efficient businesses often exceed 5:1 or 6:1. The CAC payback period is the complementary metric: it tells you how many months of gross profit you need to collect before you break even on the cost of acquiring one customer. A payback period under 12 months is excellent; 12-18 months is acceptable for well-funded companies; beyond 24 months creates significant cash flow risk especially in a high-interest-rate environment.
How to improve CLTV
CLTV can be improved on three levers: increase revenue per customer (higher prices, upsells, cross-sells), reduce costs (improve gross margin), or extend the relationship (reduce churn). In the SaaS formula, churn sits in the denominator, so a small reduction in churn produces an outsized improvement in CLTV. Reducing monthly churn from 3 % to 2 % raises CLTV by 50 % while an equivalent 50 % increase in ARPU is rarely achievable. This is why customer success, onboarding quality and product-market fit are among the highest-leverage investments a subscription business can make. For transactional businesses, loyalty programs, email retention flows, and subscription conversions all extend the effective customer lifespan.
CLV:CAC ratio benchmarks
| CLV:CAC Ratio | Interpretation | Action |
|---|---|---|
| Below 1x | Losing money per customer | Urgently reduce CAC or increase revenue |
| 1x - 2x | Marginal - barely profitable | Optimize pricing, retention, or acquisition |
| 3x | Benchmark target (SaaS standard) | Healthy - maintain and scale carefully |
| 4x - 6x | Excellent unit economics | Consider accelerating growth investment |
| Above 6x | Potentially underinvesting in growth | May be able to spend more on acquisition |
The CLV to CAC ratio is a fast health check for any growth model. A ratio below 1 means you are losing money on every customer acquired.
Frequently asked questions
What is a good CLV:CAC ratio?
The benchmark most SaaS investors use is 3:1, meaning the lifetime value of a customer should be at least three times what you spent to acquire them. Ratios below 1:1 mean you are losing money on every customer. Ratios above 6:1 sometimes indicate you are underinvesting in growth and could profitably spend more on acquisition. The right number also depends on payback period: a 3x ratio with a 24-month payback is riskier than a 3x ratio with a 6-month payback.
What is the difference between CLTV, CLV, and LTV?
CLTV (Customer Lifetime Value), CLV (Customer Lifetime Value), and LTV (Lifetime Value) are all names for the same concept and are used interchangeably in the industry. Some companies reserve LTV for revenue-based calculations and CLTV for profit-based ones, but there is no universal standard. This calculator uses CLTV and always computes gross-profit-based values when a margin input is provided.
How do I calculate CLTV for a subscription business?
The standard SaaS formula is CLTV = (Monthly ARPU x Gross Margin %) / Monthly Churn Rate. For example, if your ARPU is $100, gross margin is 75 %, and monthly churn is 2 %, then CLTV = (100 x 0.75) / 0.02 = $3,750. The formula works because average customer lifespan equals 1 / churn rate, so you are effectively multiplying monthly gross contribution by the number of months a customer is expected to stay.
What does the discount rate do in the discounted CLTV model?
The discount rate (usually the company WACC or a target ROI) converts future cash flows back to their present-day value. A customer who pays you $100 / month for three years is worth less than $3,600 in today's money because of inflation and the opportunity cost of capital. Adding the monthly discount rate to the monthly churn rate in the denominator produces a present-value CLTV that is always lower than the undiscounted version, which is why financial analysts and investors generally prefer it for formal modeling.
Why does churn have such a big impact on CLTV?
In both the SaaS and discounted formulas, monthly churn sits in the denominator. This means the relationship is not linear: halving your churn rate doubles your CLTV, while doubling ARPU also doubles CLTV. Because halving churn is often more achievable than doubling prices, churn reduction is usually the highest-leverage CLTV improvement available. A move from 4 % monthly churn to 2 % extends the average customer lifespan from 25 months to 50 months and doubles lifetime value.
Should I use revenue or profit in my CLTV calculation?
Profit-based CLTV is more useful for decision-making because it reflects what you actually keep after direct costs. Revenue-based CLTV can be misleading: a business with $10,000 CLTV on 10 % margins has the same revenue lifetime value as one with $10,000 on 80 % margins, but the second business is dramatically healthier. Always apply your gross margin so that CLTV reflects gross contribution, and compare it to a fully-loaded CAC (including sales salaries, commissions, and marketing spend) for an apples-to-apples comparison.