Customer lifetime value calculator

How it's calculated

With the example numbers: $120 × 4 purchases = $480 a year. Over 3 years that is $1,440 of revenue, and at a 60% margin you keep $864. That $864 is the customer lifetime value. Divided by the $150 it cost to win the customer, the ratio is 5.76 : 1, so each customer brings back about five and three-quarter times what you spent to get them.

This is the simple version: it does not discount future sales to today's money, which keeps it easy to check by hand. If you need a discounted figure, apply your discount rate to each year's profit before adding the years up.

What customer lifetime value tells you

Customer lifetime value (CLV, or LTV) is what an average customer is worth to you over the whole time they buy from you. Its most practical use is setting a ceiling: if a customer is worth $864 in profit, spending $150 to win one is fine, and spending $900 loses money on every customer you win.

Use the profit version, not the revenue version, when you decide what to spend. Lifetime revenue makes every channel look affordable because it ignores what it costs you to deliver the work.

Three ways to raise it

They buy more often

A reminder when the next service is due, an easy way to book again and a recurring invoice for regular work all lift the purchases-per-year figure, usually the cheapest number to move.

They stay longer

Customers drift away when they feel forgotten. Following up after each job and answering quickly keeps the years-they-stay figure climbing and the churn rate falling.

They spend more each time

Quotes with optional extras and packages raise the average sale without finding a single new customer.