Customer Lifetime Value Calculator
What a repeat customer is really worth — and what you can afford to spend winning one
Updated 2026-09-09
- Lifetime revenue
- $1,080.00
- Lifetime gross profit
- $486.00
- Profit after acquisition cost
- $461.00
- Orders to pay back acquisition
- 1.2
Spending to win a customer only makes sense when lifetime gross profit clearly exceeds it — most owners stop at the first sale and undercount.
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Owners routinely judge marketing by the first sale and conclude it does not pay. A $45 order looks like a poor return on a $25 acquisition cost until you notice the same customer buys eight times a year for three years. This calculator puts the whole relationship on one line.
How lifetime value is calculated
Multiply the average order value by the number of orders per year and the number of years a customer stays, then multiply by your gross margin. That is lifetime gross profit — the money the relationship actually contributes.
Subtract what it costs to win the customer and you have the net contribution. Divide acquisition cost by the gross profit on a single order and you get the payback point: how many purchases before that customer stops being an investment.
Finding the inputs in your own records
Every figure is already in your sales history; none of it needs a survey.
- Average order value: total revenue divided by number of orders
- Orders per year: total orders divided by number of distinct customers
- Retention: how many customers who bought two years ago still buy now
- Gross margin: from your margin calculation, not a guess
- Acquisition cost: total marketing spend divided by new customers won
What the ratio should look like
A widely used rule of thumb is lifetime gross profit of at least three times acquisition cost, with payback inside the first year. Below that, growth consumes cash faster than it generates it, which is survivable with funding and dangerous without.
The other half of the picture is payback speed. A high lifetime value that takes three years to arrive still leaves you paying for customers today with money you will not see until 2029.
Cheaper ways to raise the number
Retention and order value move lifetime value further than winning more customers, and cost far less.
- Increase order frequency with restock reminders at the right interval
- Raise average order value with bundles and a sensible free-delivery threshold
- Fix the causes of churn — stockouts, slow replies, inconsistent quality
- Keep clean customer records so you know who has lapsed and when
- Lift margin, which multiplies straight through the whole calculation
Where the model breaks down
Lifetime value is an average, and averages hide the distribution. In most small businesses a small group of customers contributes the bulk of the profit while a long tail barely covers its own service cost. Segment before you spend: the acquisition budget that works for your best segment can be badly wrong for the rest.
Keep the numbers in a spreadsheet
Ready-made Excel and Google Sheets templates that pick up where this calculator stops. One-off purchase, instant download.
Simple Profit & Loss (P&L) Statement Spreadsheet
Log transactions; get a monthly and yearly P&L with margins.
Invoice Template + Invoice Log Spreadsheet
Auto-totalling invoice with tax, discount and balance due, plus an overdue-flagging log.
Frequently asked questions
What is a good customer lifetime value?
The absolute number matters less than the ratio: lifetime gross profit of roughly three times or more your cost to acquire a customer is a common healthy benchmark.
Should I use revenue or profit for lifetime value?
Gross profit. Lifetime revenue looks impressive and tells you nothing about what you can afford to spend.
How do I estimate how long customers stay?
Look back at cohorts — of the customers who first bought two or three years ago, how many still buy? That percentage is your retention evidence.
What if I have no repeat customers?
Then lifetime value equals the profit on one sale, and acquisition spend must pay back immediately. Improving repeat purchase is usually cheaper than finding more first-time buyers.
Related reading
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