Customer Lifetime Value (CLV) Calculator
Calculate the net present value of a customer relationship accounting for churn, profit margin, and the time value of money. Use it to set acquisition cost targets and retention budgets.
Last updated: September 2026
Formula below · 1 source (Wikipedia) · Updated Sep 2026
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About this calculator
Customer Lifetime Value (CLV) estimates the discounted future profit a customer generates over their relationship with your business. The formula used here is: CLV = monthly profit × Σ (from t = 0 to lifespan − 1) of [(1 − churn)^t ÷ (1 + discountRate/12)^t], where monthly profit = avgMonthlyRevenue × (profitMargin / 100). The sum has a closed form: with q = (1 − churn) ÷ (1 + discountRate/12), it equals (1 − q^lifespan) ÷ (1 − q). Each month's profit is weighted by the probability that the customer is still active, (1 − churn)^t, and discounted back to today at the monthly rate, (1 + discountRate/12)^t, with the first month counted at the start of the relationship. Average Customer Lifespan sets the horizon in months over which profit is counted. With a 0% discount rate the sum reduces to (1 − (1 − churn)^lifespan) ÷ churn. A lower churn rate dramatically increases CLV because it extends the effective lifespan. Profit margin scales the result, separating revenue from actual business value.
How to use
Inputs: $100 monthly revenue, 60% gross margin, 3% monthly churn, 24-month lifespan, 10% annual discount rate. Monthly profit = $100 × 0.60 = $60. Monthly discount rate = 0.10 / 12 = 0.00833. q = (1 − 0.03) / 1.00833 ≈ 0.96198. q^24 ≈ 0.39448. Discounted months = (1 − 0.39448) / (1 − 0.96198) ≈ 15.93. CLV = $60 × 15.93 ≈ $955.67. For comparison, with a 0% discount rate the same inputs give (1 − 0.97^24) / 0.03 ≈ 17.28 months, or about $1,036.97, so discounting reduces the value by about 8%.
Frequently asked questions
What is the difference between CLV and LTV in marketing?
CLV (Customer Lifetime Value) and LTV (Lifetime Value) are used interchangeably in most marketing contexts and refer to the same concept: the total value a customer brings over their entire relationship with a business. Some practitioners distinguish them by saying LTV is the gross revenue figure while CLV incorporates profit margin and discounting, making it a true net present value measure. For budgeting and acquisition decisions, the discounted, margin-adjusted CLV is more accurate because it reflects actual business economics rather than top-line revenue.
How does monthly churn rate affect customer lifetime value?
Churn rate has a nonlinear, compounding impact on CLV. At 2% monthly churn, average customer lifespan is about 50 months; at 5% churn it drops to 20 months — a 60% reduction in lifespan from a 3 percentage point change. Because CLV scales roughly with lifespan, halving churn can nearly double CLV. This is why retention investments often outperform acquisition spending on a pure CLV basis. Even a 0.5% monthly improvement in churn can translate into hundreds of dollars of additional CLV per customer.
Why is the discount rate important when calculating customer lifetime value?
The discount rate reflects the time value of money — a dollar of profit received 24 months from now is worth less than a dollar today, because today's dollar can be invested and earn returns. In a CLV context, the discount rate also implicitly captures business risk: the higher the uncertainty of future cash flows (e.g., a startup vs. an established brand), the higher the appropriate discount rate. Using a 0% discount rate overstates CLV, particularly for businesses with long customer relationships or high capital costs. A common approach is to use the company's weighted average cost of capital (WACC) as the discount rate.