Free tool Customer lifetime value calculator and formula
Lifetime value is what a customer is worth over the whole time they stay. Enter monthly revenue per customer, gross margin and monthly churn, and get LTV, the expected lifetime and the monthly profit behind it.
- Revenue or margin LTV
- Updates as you type
- Runs locally
Work out lifetime value
All three inputs are monthly. Leave gross margin empty to get revenue LTV; fill it in to get the margin LTV you can compare with acquisition cost.
Average revenue per account (ARPA) per month: recurring revenue ÷ paying customers.
Revenue left after the cost of serving the customer. Leave empty to use revenue.
Share of customers lost each month. Must be above 0%.
Customer lifetime value
$800.00
Monthly gross profit per customer ÷ monthly churn.
Share these inputs: the values go after the # in the link, so they never reach a server.
https://tapcub.com/tools/customer-lifetime-value-calculator
Version v1.0Updated Update history
What the three numbers mean
The calculator uses the simple steady-state model: the same revenue every month and the same share of customers leaving every month. It is a planning estimate, not a forecast.
Customer lifetime value
The gross profit (or revenue, without a margin) you can expect from an average customer before they leave. It is the ceiling on what one customer is worth to acquire.
Expected lifetime
With a constant churn rate, the average customer stays 1 ÷ churn periods. 4% monthly churn means 25 months; halve churn and the lifetime doubles.
Monthly gross profit
What each customer contributes per month after the cost of serving them. LTV is this number times the expected lifetime.
Churn is the big lever
LTV moves in proportion to revenue and margin, but inversely to churn. Going from 4% to 3% churn adds a third to LTV; a 10% price rise adds 10%.
Use the same period for every input. If you only know annual churn, convert it to a monthly rate first rather than dividing by 12 — see the FAQ.
Three steps to a usable LTV
The arithmetic is one line. Getting honest inputs is the work.
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1
Get monthly revenue per customer
Recurring revenue for the month divided by paying customers that month. Exclude one-off setup fees unless every customer pays them.
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2
Add gross margin
Subtract hosting, payment fees, support and other costs of serving customers. Skip it only if you want revenue LTV for comparing channels with each other.
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3
Use measured churn
Take customers lost ÷ customers at the start of the month, averaged over several months. The churn rate calculator does this step.
LTV = revenue per customer × gross margin ÷ churn
If a constant share of customers leaves each period, the average customer stays 1 ÷ churn periods. Multiply that lifetime by what a customer earns you per period and you have the simple lifetime value.
- All three inputs must use the same period, usually a month
- Without a margin the result is revenue LTV, which overstates what a customer is worth
- The model assumes churn never changes; for young products, check it against cohort data
- No discount rate is applied: a dollar in month 30 counts the same as a dollar today
Lifetime value
LTV = ARPA × gross margin ÷ monthly churn
$40 × 80% ÷ 4% = $800
Expected lifetime
lifetime = 1 ÷ monthly churn
1 ÷ 4% = 25 months
Monthly gross profit
profit = ARPA × gross margin
$40 × 80% = $32 a month, and $32 × 25 months = $800
LTV by acquisition channel
One subscription product, 80% gross margin, three channels. Revenue per customer is similar; churn is not, and that is what separates the channels once you put acquisition cost next to LTV.
| Channel | Revenue / customer / month | Monthly churn | LTV | CAC | LTV:CAC |
|---|---|---|---|---|---|
| Organic search | $40 | 3.0% | $1,066.67 | $120 | 8.9 : 1 |
| Paid social | $35 | 7.0% | $400.00 | $300 | 1.3 : 1 |
| Referral | $45 | 2.5% | $1,440.00 | $150 | 9.6 : 1 |
Paid social customers churn more than twice as fast, so each one is worth $400 against $300 to acquire. The cheaper-looking channel on a sign-up basis can be the weakest on value. Sample figures.
Where LTV estimates go wrong
A small error in churn turns into a large error in LTV, because churn sits in the denominator.
Using revenue against CAC
Acquisition is paid out of margin, not revenue. Comparing revenue LTV with CAC makes every channel look profitable.
Mixing periods
Monthly revenue with annual churn gives an LTV twelve times too large. Put every input on the same period.
Trusting early churn
With three months of data, churn has not settled. A 1% early churn rate implies a 100-month lifetime nobody has observed.
One LTV for everyone
An average hides that channels, plans and countries churn differently. Calculate LTV per segment before deciding where to spend.
Measure the inputs instead of guessing them
The formula is only as good as the churn and revenue you feed it. TapCub measures retention from your events and keeps the acquisition source on each visitor, so you can see which channels bring customers who stay.
Customer lifetime value questions
Still have a question?
Chat with the team behind TapCub — we usually reply within a few hours on business days.
What is customer lifetime value?
The total revenue, or gross margin, you expect from a customer over the whole time they remain a customer. It is also called CLV or LTV; the abbreviations mean the same thing. See LTV in the glossary.
How do I calculate customer lifetime value?
For a subscription: monthly revenue per customer × gross margin ÷ monthly churn. $40 a month at 80% margin with 4% monthly churn gives $40 × 0.8 ÷ 0.04 = $800.
Should LTV use revenue or profit?
Use gross margin when you compare LTV with acquisition cost, because acquisition is paid out of margin. Revenue LTV is fine for comparing channels or cohorts with each other.
What is a good LTV to CAC ratio?
3 : 1 is a commonly quoted rule of thumb for subscription businesses. It is a convention rather than a measured benchmark, and it ignores how many months it takes to earn the CAC back. Compare channels with each other and track the ratio over time. The CAC calculator gives the other half.
How do I convert annual churn to monthly churn?
Do not divide by 12, because churn compounds. Monthly churn = 1 − (1 − annual churn)^(1/12). 40% annual churn is about 4.2% a month, not 3.3%.
How do I calculate LTV for an online store without subscriptions?
Define churn as customers who have not bought again within a window you choose, or use cohorts: take customers whose first order was in one month and add up everything they spent afterwards, divided by the number of customers. The cohort method uses what actually happened.
Why is the formula LTV so high for my new product?
Early churn is often low and unstable: the first customers are enthusiasts, and nobody has reached their first renewal yet. A 1% churn rate implies a 100-month lifetime. Cap the lifetime or wait for cohort data before using LTV to set budgets.
Update history
New features, fixes and data refreshes for this tool, newest first.
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· v1.0
LaunchedFirst release.
Missing something or found an error? Tell us — requests that come up often go into the next update. All tool updates
Put LTV next to what you pay for a customer
Lifetime value only means something against acquisition cost and real retention. Measure both from the same data.