Customer Lifetime Value Calculator
What a customer is worth over their lifetime, and whether that justifies what you pay to acquire them.
Lifetime value is gross profit per period divided by the churn rate.
How the customer lifetime value calculator works
Lifetime value is gross profit per period divided by the churn rate. Dividing by churn is the same as multiplying by the average lifetime, because a customer who churns at 5% a month lasts on average twenty months.
That sensitivity is the point. Halving churn doubles LTV, which is why retention work usually beats acquisition work at the margin — and why an LTV quoted without its churn assumption is not a number, it is a hope.
The LTV:CAC ratio is the test. Above 3:1 is the widely used benchmark for a healthy subscription business; below 1:1 means every new customer destroys value. Very high ratios are not automatically good — they often mean you are under-investing in growth.
Formula: LTV = (revenue × gross margin) / churn rate
Worked examples
| Inputs | Lifetime value | Note |
|---|---|---|
| 120 a month, 75% margin, 5% churn | $1,800.00 | LTV 1,800, ratio 4.5:1 |
| Churn halved to 2.5% | $3,600.00 | LTV doubles to 3,600 |
| Acquisition too expensive | $375.00 | below 1:1 — value destroyed |
FAQFrequently asked questions
How do I calculate customer lifetime value?
Gross profit per period divided by the churn rate for that period. At 5% monthly churn a customer lasts 20 months on average.
What is a good LTV:CAC ratio?
3:1 is the widely used benchmark. Below 1:1 you lose money on every customer; far above 5:1 usually means you could profitably spend more on growth.
Should LTV use revenue or gross profit?
Gross profit. Using revenue ignores the cost of serving the customer and inflates the figure, often by a lot.
Why does churn matter so much?
Because LTV divides by it. Halving churn doubles lifetime value, which is why retention usually beats acquisition at the margin.
Should I discount future revenue?
For long-lived customers, yes — money arriving in year five is worth less than money now. The discount field applies that.
Where these figures come from
- Corporate Finance Institute — EBITDA — why EBITDA is a non-GAAP measure with no single definition
- US SEC — Non-GAAP Financial Measures, Compliance & Disclosure Interpretations — the disclosure rules that exist precisely because EBITDA is not standardised
- Australian Securities and Investments Commission — the Australian corporate regulator
Last checked: September 2026. These are standard management-accounting definitions; where a term has no single agreed definition, the page says so.