B/Billable Toolkit
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Customer Lifetime Value Calculator

Find out what an average customer is worth over the whole relationship, and how much you can sensibly spend to win one.

$
%
Share of each sale left after direct costs
years
$
Marketing and sales spend ÷ new customers

Customer value

How it’s calculated

Yearly revenue per customer is the average sale times purchases per year. Multiplying by your gross margin and the years a customer stays gives the profit one customer brings in over their lifetime. Comparing that with what it costs to win a customer shows whether your marketing pays off.

yearly revenue = average sale × purchases per year lifetime value = yearly revenue × gross margin × years LTV:CAC = lifetime value ÷ cost to win a customer

Worked example

A customer who spends $85 four times a year brings in $340 a year. At a 60% gross margin over 3 years, that is $612 of profit from $1,020 of sales. If winning that customer costs $120, the LTV:CAC ratio is 5.1:1 and the cost is earned back in about 7.1 months.

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Questions

What is a good LTV to CAC ratio?

A ratio of 3:1 or higher is a common target. Below 1:1 means you spend more to win customers than they bring back in profit.

Should CLV use revenue or profit?

Profit gives the more useful answer, because it is what you can actually spend on winning customers. This calculator shows both.

Doing these numbers every month? Accounting software can automate invoices, reminders and tax reports.

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