Calculated from the sample figures using the displayed formula.
What is the customer lifetime value formula?
Average purchase value × Purchase frequency × Customer lifespanThis simple customer lifetime value model estimates gross revenue from an average customer relationship.
What do the inputs mean?
- Average purchase value
- The value entered for average purchase value. Keep its period and units consistent with the other inputs.
- Purchases per year
- The value entered for purchases per year. Keep its period and units consistent with the other inputs.
- Average customer lifespan in years
- The value entered for average customer lifespan in years. Keep its period and units consistent with the other inputs.
How to calculate it step by step
- Define the decision.
Write down what the result will help you compare or decide. - Collect matching inputs.
Use figures from the same period and apply the definitions shown on this page. - Apply the formula.
Average purchase value × Purchase frequency × Customer lifespan. - Check the units.
Confirm whether the result is a currency amount, percentage, number of periods or ratio. - Test a second case.
Change one assumption at a time to see what drives the result.
Worked example
Using the sample figures in the calculator, the result is $1,920.00. Change one figure at a time and recalculate to see which assumption has the greatest effect. A spreadsheet should return the same result when it uses the same formula, units and timing.
When should you use customer lifetime value formula?
Use the result as a starting point for acquisition and retention planning.
Limitations and common mistakes
Gross-revenue CLV is not profit. Margin, churn, discounting and service costs may materially change the decision.
Do not mix annual figures with monthly figures, ending balances with averages, or percentages with whole numbers. Record the definition used so another person can reproduce the result.
Frequently asked questions
What is customer lifetime value formula?
This simple customer lifetime value model estimates gross revenue from an average customer relationship.
How should I use customer lifetime value formula?
Use the formula only after matching every input to the same period, unit and definition. Then compare the result with a worked example and the decision you are trying to make.
What is the most common mistake with customer lifetime value formula?
Gross-revenue CLV is not profit. Margin, churn, discounting and service costs may materially change the decision.
Can I calculate customer lifetime value formula in a spreadsheet?
Yes. Reproduce the displayed equation with separate cells for each input, keep percentages as decimals, and test the spreadsheet against the worked example before replacing the sample figures.
Sources and methodology
This page uses the Calculate a Break-Even Point in Units and Dollars for the underlying financial or reporting context. Spreadsheet-related behavior is checked against Microsoft’s financial-function documentation. Examples are illustrative and use the formula displayed on the page.