Why use gross margin instead of revenue?

Revenue does not account for direct cost to serve. Contribution based on gross margin is a closer economic input, though it still excludes overhead.

Is CLV to CAC a guaranteed benchmark?

No. The ratio is a scenario output and does not determine liquidity, growth quality, payback timing, or company value.

What if retention changes over time?

Use a cohort cash-flow model instead. This closed form assumes one constant retention probability.

Retention-Based Customer Lifetime Value Calculator

Connect recurring contribution margin, retention, discounting, and acquisition cost.

Discounted gross CLV

Net CLV after CAC

CLV-to-CAC comparison

CurrencyRevenue per customer per periodAverage recognized revenue for one customer in one consistent month, quarter, or year.Gross margin (%)Retention rate per period (%)Probability that an active customer remains active into the next equal period.Discount rate per period (%)Use a rate for the same period length as revenue and retention.Customer acquisition cost

How to Estimate Customer Lifetime Value

All recurring inputs must use the same period: monthly with monthly, quarterly with quarterly, or annual with annual.

Choose a currency for display only.

Use cohort evidence

Retention and margin averages can hide large differences by acquisition channel or customer cohort. Calculate separate scenarios when behavior differs materially.

What This CLV Model Measures

The calculator values expected future contribution from a customer who is active now. Each future period is weighted by constant retention and discounted. Gross CLV is before acquisition cost; net CLV subtracts CAC once. The ratio divides gross CLV by CAC and is undefined when CAC is zero.

Customer Lifetime Value Examples

Monthly constant-retention scenario

Per-period cohort assumptions

revenuePerCustomerPerPeriod:100

grossMarginPercent:80

retentionRatePercent:90

discountRatePercent:10

acquisitionCostPerCustomer:100

Discounted future CLV

360 gross CLV; 260 net CLV; 3.6× CLV/CAC

Per-period contribution is 80. The constant-retention discounted future series equals 360 before CAC.

No next-period retention

Per-period cohort assumptions

revenuePerCustomerPerPeriod:50

grossMarginPercent:40

retentionRatePercent:0

discountRatePercent:0

acquisitionCostPerCustomer:20

Discounted future CLV

0 gross CLV; -20 net CLV

This formulation values future retained periods, so zero retention produces no future contribution.

Match period lengths

Do not combine monthly retention with an annual discount rate without converting one to the other's period.

Frequently Asked Questions

No. The retention term starts the modeled series with the next retained period. Current-period contribution should not be added unless that matches your decision definition.

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Constant-Retention CLV Formula

Gupta, Lehmann, and Stuart describe the constant-margin, constant-retention discounted relationship used here. Rates are entered as percentages and converted to decimals.

Formula

m = revenue per customer × gross margin rate

Contribution margin per period

m = revenue per customer × gross margin rate

Gross future CLV

CLV = m × r ÷ (1 + i − r)

Net CLV and ratio

net CLV = gross CLV − CAC; ratio = gross CLV ÷ CAC

Scientific Background

The closed form converges when 1 + discount rate − retention is positive. A 100% retention rate therefore requires a positive discount rate. Real customer behavior is rarely stationary, so cohort cash-flow models are preferable when data supports them.