Free tools / LTV calculator
Free toolLTV calculator
What is one customer actually worth to you? Not in revenue, in profit, and not this month, over the whole time they stay. This is the number that tells you how much you can afford to spend winning them.
Your numbers
Nothing you type here is stored.
Your customer value will appear here
Fill in revenue, margin and churn, then press Calculate.
What churn is costing you
Now compare it to what you spend winning a customer: CAC calculator and LTV to CAC.
How this works
The formula
LTV = monthly revenue × gross margin × (1 ÷ monthly churn)
If 5% of customers leave each month, an average customer stays 20 months. At 50,000 a month and a 60% margin, they generate 30,000 of gross profit a month, so about 600,000 over their life.
Why margin, not revenue
Revenue is not value. If it costs you 40,000 to deliver a 50,000 service, the customer is worth 10,000 a month, not 50,000. Using revenue instead of gross profit is the fastest way to convince yourself an unprofitable business is working.
What this does and does not tell you
- It is an estimate built entirely on the three assumptions you entered. Change any one and the answer moves a long way.
- It assumes churn stays flat. In reality churn is usually highest in the first few months and falls after, which this simple model cannot see.
- It assumes spend per customer stays flat. If your customers upgrade over time, this understates their value. If they downgrade, it overstates it.
- It is gross profit, not cash. Value spread over two years does not pay next week’s wages.
- It ignores the time value of money. Profit arriving in month twenty is worth less than the same profit today.
Questions people ask
Take the number of customers who left during a month and divide by the number you had at the start of that month. If you began with 200 and 10 left, that is 5%. Use a few months averaged together rather than one, because a single month is noisy. If you are too early to have meaningful churn data, this calculator is guessing rather than measuring, and you should treat the answer accordingly.
Gross margin is what is left after the direct cost of delivering to that customer: hosting, materials, support time, payment fees. Profit margin comes after all your overheads too, like rent and admin salaries. LTV uses gross margin because overheads do not rise with each extra customer, so they belong in your break-even calculation rather than in the value of one customer.
Because lifetime is one divided by churn, and dividing by a small number is violent. Going from 5% to 4% churn extends the average life from 20 months to 25, a 25% jump in value from a single percentage point. That is exactly why retention usually beats acquisition as a place to spend effort.
Treat it as a working estimate, not a fact. It is genuinely useful for comparing options, for deciding how much you can afford to spend on acquisition, and for seeing what retention is worth. It is not a valuation and it is not money you have. Anyone presenting LTV as a hard asset should be looked at carefully.
Most businesses have never worked this out.
Knowing what a customer is worth changes what you are willing to spend to get one. We help you track it properly.
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