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Small Business · Return

Customer Lifetime Value

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Use customer lifetime value to estimate the total gross profit an average customer generates across the time they stay with you.

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Interactive workbench

Subscription LTV

Avg Monthly Revenue×Gross Margin%100×Lifetime Months

$50/month at 80% margin for 24 months is $960 of lifetime value.

Step 1 of 4

Variables and units

  • Avg Monthly Revenue

    Average revenue per customer per month.

    currency

  • Gross Margin

    Gross margin percentage on that revenue.

    percent

  • Lifetime Months

    Average months a customer stays.

    count

Common mistakes

  • Using revenue instead of gross profit.
  • Overestimating how long customers stay.

Step-by-step example

Subscription LTV

  1. 1. Start with the example inputs

    • Avg Monthly Revenue$50
    • Gross Margin80%
    • Lifetime Months24

  2. 2. Apply the formula

    Avg Monthly Revenue×Gross Margin%100×Lifetime Months

  3. 3. Run the numbers

    $960.00

    $50/month at 80% margin for 24 months is $960 of lifetime value.

What this result means

A customer lifetime value of $960.00 estimates the gross profit one customer contributes across the whole relationship. It sets the ceiling on what you can afford to spend acquiring a customer — businesses commonly aim for LTV around three times acquisition cost — and shows why retention improvements compound so powerfully.