Customer Lifetime Value (LTV) Formula
Customer Lifetime Value (LTV) is a metric that estimates the total revenue a business can reasonably expect from a single customer account over their relationship with the company. Understanding LTV helps SaaS businesses to make data-driven decisions on marketing spend, customer retention, and product development.
Bottom Line
Customer Lifetime Value (LTV) is a metric that estimates the total revenue a business can reasonably expect from a single customer account over their relationship with the company. Understanding LTV helps SaaS businesses to make data-driven decisions on marketing spend, customer retention, and product development.
Customer Lifetime Value Calculator
Calculate CLV, CLV:CAC ratio, and acquisition payback from purchase patterns.
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Formula
Copy the exact expression or work through it step by step below.
LTV = Average Purchase Value x Purchase Frequency x Customer Lifespan Variables
LTV
LTV
The total revenue (or gross profit) a customer is expected to generate over the whole relationship, in currency units. The upper bound on profitable acquisition spend — when measured on gross margin. Revenue-based LTV overstates the ceiling by COGS.
APV
Average Purchase Value
The average value of a single purchase, in currency units. For subscriptions this is the recurring charge per billing cycle.
PF
Purchase Frequency
How often a customer buys within the period, as a count (for example 12 for monthly billing over a year). Multiplies purchase value into periodic revenue.
CL
Customer Lifespan
The expected length of the customer relationship, in the same period unit as purchase frequency (years or months). Often estimated as one divided by the churn rate.
Step By Step
- 1
Set the baseline case with the real calculator inputs.
Avg Purchase Value = $50.00, Purchase Frequency Per Year = 4, Customer Lifespan Years = 3, Acquisition Cost = $100
- 2
Keep purchase value, frequency, and lifespan on matching time units so they multiply cleanly (all annual or all monthly).
A 49 monthly charge with 12 purchases a year and a 3-year lifespan stays on a monthly-to-annual footing.
- 3
Apply the formula and read the first calculator outputs, not just the headline assumption.
The calculator lands with clv at 600 and annual value at $200.
- 4
Re-run with a shorter lifespan or higher churn to see how fragile LTV is to retention, which usually moves it more than price.
Cutting lifespan from 3 years to 18 months halves LTV without touching price.
Worked Example
Customer Lifetime Value sample case
Avg Purchase Value
$50.00
Purchase Frequency Per Year
4
Customer Lifespan Years
3
Acquisition Cost
$100
LTV = Average Purchase Value x Purchase Frequency x Customer Lifespan using avg purchase value $50.00, purchase frequency per year 4, customer lifespan years 3, acquisition cost $100.
The calculator lands with clv at 600 and annual value at $200.
Common Variations
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Questions people ask next
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Sources & References
Related Content
Keep the topic connected
Customer Lifetime Value (CLV) Examples Worked Out
Four worked customer lifetime value examples showing CLV, margin-adjusted CLV, LTV:CAC ratio, and payback across order value, frequency, and retention.
How to Use Customer Lifetime Value Calculator
Master your business growth by calculating Customer Lifetime Value (CLV). Optimize marketing spend, identify valuable customers, and boost profitability.
What Is Churn Rate? Simply Explained
Understand Churn Rate, a vital SaaS metric, with a clear definition, formula, real-world examples, and strategies to improve customer retention and revenue.