Customer lifetime value calculator
Enter order value, orders per year, gross margin and years as a customer to see yearly revenue, lifetime revenue and lifetime gross profit.
By the PromptLab team6 October 20264 min read
Work out what one customer is worth to you over the years they keep ordering, in revenue and in gross profit.
Customer lifetime value calculator
Customer lifetime value
$67,200
Lifetime gross profit from one customer
Revenue per year
$48,000
Order value × orders per year
Lifetime revenue
$240,000
How to use the customer lifetime value calculator
Enter four numbers for a typical customer:
- Average order value: what one order is worth.
- Orders per year: how often they reorder.
- Gross margin as a percentage.
- Expected years as a customer: how long they stay.
The calculator returns the customer lifetime value (CLV), which here means lifetime gross profit from one customer, plus revenue per year and lifetime revenue.
The formula in plain words
- Revenue per year = average order value × orders per year.
- Lifetime revenue = revenue per year × years as a customer.
- Lifetime gross profit (CLV) = lifetime revenue × gross margin.
This is a simple version. It doesn't discount future years or count the cost of serving the account, so treat it as a clear first estimate.
A worked example
A packaging manufacturer's typical customer places orders worth $8,000, six times a year. Gross margin is 30% and customers stay for about five years.
- Revenue per year: $8,000 × 6 = $48,000.
- Lifetime revenue: $48,000 × 5 = $240,000.
- Lifetime gross profit: $240,000 × 0.30 = $72,000.
So one new customer is worth about $72,000 in gross profit. That's the ceiling for what it makes sense to spend winning and keeping them.
What a good result looks like
CLV only means something next to what it costs to win the customer. Lifetime gross profit should comfortably exceed the cost of winning and serving a customer, but there's no fixed ratio that fits every business.
Calculate it per segment. Distributors, contract buyers and one-off project buyers have very different numbers, and an average hides that.
How to improve customer lifetime value
Using the example above, each lever has an effect:
| Change | New CLV |
|---|---|
| Seven orders a year instead of six | $84,000 |
| Six years as a customer instead of five | $86,400 |
| 33% gross margin instead of 30% | $79,200 |
| $9,000 average order instead of $8,000 | $81,000 |
The first row works out as $8,000 × 7 × 5 × 0.30 = $84,000. The others work the same way.
Ways to pull each lever:
- Reorders: follow up before a customer runs out, not after.
- Retention: talk to accounts that have gone quiet.
- Margin: use customer price lists and watch discounts. The margin and markup calculator helps here.
- Order value: quote bigger pack sizes and related products.
When to use lifetime value
The figure is most useful when you decide where to spend effort. It tells you how much a repeat customer is worth next to a one-off buyer, and how much a lost account really cost you.
It also helps with pricing and service. If a customer's lifetime gross profit is high, a quick answer on a sample or a small concession on the first order is easy to justify. If it's low, you can see that too.
Keep the inputs simple at first. Pick ten typical accounts, work out their average order, order count and years, and run the calculator on those. Refine later once you trust the data.
Also check the margin input. Use gross margin on the products that customer actually buys, not the company average, because a customer who buys mostly low-margin items is worth less than the revenue suggests. Do the same when you compare segments, so that you are measuring like with like.
Frequently asked questions
Is CLV based on revenue or profit?
This calculator shows both. Lifetime revenue is the total sales, and lifetime gross profit (the CLV) is what's left after the cost of the products you sold.
How do I estimate how many years a customer stays?
Look at your own accounts. See how long customers who started a few years ago kept ordering, and use a cautious average. If you're unsure, run the calculator with two or three different values.
Does the calculator discount future years?
No. It adds up simple yearly amounts. A discounted version would value later years slightly lower, but the simple figure is easier to explain and compare.
Should I calculate CLV for every customer?
Calculate it for segments first, such as by industry or order size. Then compare a segment's CLV with what it costs to win it.
What if a customer buys several product lines?
Use an average order value and order count across all lines, or run the calculator once for each line and add the results.