What’s the Value of a Customer?

LTV is an important metric in understanding the present value of a typical customer. The more data that you can consistently collect and add to the calculator, the more accurate your results will be. Try to use the calculator to consider different channels or acquisition or different segments of customers to determine which combinations help you maximize your profits.

Your LTV is the present value of all of the future cash flows (profits) that a typical customer will generate over a lifetime of doing business with you, discounted slightly, for the cost of capital, less your costs of acquisition.

Maximize Your Profit Rather Than Minimize Your Cost

Using your LTV strategy wisely, you can maximize your investment in acquiring the right customers, thus maximizing your profit, instead of just minimizing your cost. Maximizing the benefit of LTV will help you maximize your return on investment.

Free LTV Resource Guide
  • Estimate the average purchase value or you can use the average annual value of a customer.
  • What percentage of your average sale is profit?
  • Typical Number of Purchases Per Year
  • How many years do you typically retain a customer?
  • What percentage of your customers do you typically retain for the typical duration (number of years) that you estimated above?
  • The discount rate can get complicated. Its purpose is to estimate the present value of earnings that you will receive at some point in the future. If you don't know your weighted cost of capital, you can use a range of 9% to 15% as a good estimate.
  • If you know the average costs to acquire a customer, enter it below (COCA).
  • The current lifetime value of each new customer.

LTV Resource Guide

How to calculate and benefit from LTV

This, free resource guide, provides an overview of the calculations and uses of Customer Lifetime Value. This essential metric can be used to help you optimize strategies to generate the best ROI.

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  • How to calculate LTV
  • Use for optimizing strategies
  • Use for optimizing profits
  • Value to the CEO
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