Customer Lifetime Value Calculator

Customer lifetime value formulas, with Excel and Google Sheets versions

Every number in the calculator comes from one of these. The cell formulas work the same in Excel and Google Sheets. They assume revenue per account in B2, gross margin in B3, churn in B4 (simple) or logo retention in B4 (cohort), expansion in B5, discount rate in B6, years in B7 and CAC in B8. The examples use the calculator's default numbers, which are illustrative. For the definition and its history, see customer lifetime value. For the formula variants on their own, see the LTV formula.

The cohort formula assumes annual billing in advance, so year one is not discounted. If NRR equals 1 + discount rate, k is exactly 1 and the closed form divides by zero. Use the SUMPRODUCT version, which always works.

How to calculate customer lifetime value, step by step

1. Pick one segment. SMB, mid-market and enterprise accounts churn and expand differently. A blended CLV describes no real customer.
2. Get revenue per account. Recurring revenue for the segment divided by paying accounts. Leave out implementation and services fees.
3. Apply subscription gross margin. Take out hosting, support and customer success costs. Revenue CLV overstates value by the full cost to serve.
4. Choose the churn number and match the period. Monthly revenue goes with monthly churn, annual with annual. Convert with compounding, never by multiplying by 12. The monthly to annual churn guide has the method.
5. Divide for the simple CLV. Gross profit per period / churn per period.
6. Then run the cohort version. Split retention from expansion, cap the horizon, discount each year. If the two answers are far apart, the simple formula is counting value from years you cannot see yet.
7. Read it against CAC. CLV:CAC tells you if acquisition pays. Payback tells you how long the cash is out. The CAC calculator builds the CAC number from spend and new customers.

Why the simple CLV formula overstates B2B SaaS value

The simple formula assumes churn stays flat forever, nothing expands, and a dollar in year nine is worth a dollar today. Run one account through every method and the answers spread wide. Same account each time: $24,000 a year, 80% margin, 88% logo retention, 15% expansion on kept accounts, 10% discount rate. All numbers illustrative.

The capped, discounted number is about half the simple one. Against a $30,000 CAC, that is the difference between a 5.3x ratio that looks like you should spend more and a 2.7x ratio that sits under the 3:1 floor. Same customer, same data. For the method behind the cohort view, see cohort-based LTV and how to calculate LTV with NRR.

Worked example: one $24,000 account over five years (illustrative)

A B2B software company signs an account at $24,000 a year with an 80% subscription gross margin. Of every 100 accounts like it, 88 are still paying a year later, and those that stay grow 15% a year. Finance discounts at 10%. CAC for the segment is $30,000. Here is the math, checked twice:

Revenue per account signed is the revenue of the accounts that stayed, spread across all 100 you signed. It barely moves, because expansion only just covers the losses: NRR is 101.2%. Read it the way a CFO would. CLV is $81,820 in today's dollars. CLV:CAC is 2.7x, below 3:1. CAC pays back in about 18.7 months of gross profit. The deal is not broken, but the case for spending more to acquire this segment rests on retention, not on the simple formula's $160,000.

What is a good CLV to CAC ratio?

The usual floor is 3:1: lifetime gross profit three times what it cost to win the customer. Treat it as a floor on discounted, capped CLV, and always read payback next to it. These are the benchmarks we could confirm at the source:

We do not publish a CLV benchmark in dollars. It scales with price, so a dollar figure from another company tells you nothing about yours. For more on the ratio itself, read what is a good LTV to CAC ratio.

Which churn and margin numbers should you use?

Use gross revenue churn and subscription gross margin for the segment you are pricing. Those two choices move CLV more than any formula tweak.

• Revenue churn or logo churn. Logo churn counts every account the same. If small accounts leave more often, logo churn makes big accounts look short-lived. Gross revenue churn weights accounts by what they pay. Use net revenue churn only in the cohort tab, where expansion has its own line.
• Monthly or annual. For annual contracts, monthly churn mostly shows when renewal dates fall. Use annual churn and annual revenue. 1.5% a month is 16.6% a year compounded, not 18%. The churn rate calculator does that conversion for you.
• Which margin. Subscription gross margin, after hosting, support and the success team that keeps accounts. Leave services revenue and its margin out, or model it as a separate stream.
• Which retention for the cohort tab. Logo retention from your own cohorts, one year out. Expansion is the growth of accounts that stayed. ORM's monthly ARR retention waterfall gives you both lines, as the next section shows.

Where the inputs come from, and what moves them first

Pete Furseth, ORM's COO, puts one chart in front of every SaaS CFO: a monthly ARR retention waterfall. Beginning ARR, then churned customer ARR, churned product ARR and product decreases, then new customer, new product and increased product ARR, then ending ARR, with GRR and NRR on the same chart. The loss lines give you churn. The two existing-customer gain lines give you expansion. New customer ARR stays out of both. To turn one period of those lines into GRR, NRR and net new ARR, use the ARR calculator.

CLV is a forecast of those lines, so the signals that move them move CLV. Here is what ORM sees across its customers:

• Renewal risk shows about six months out. ORM starts predicting a renewal when the renewal opportunity is created, usually 12 months ahead. Risk comes into focus about 6 months before the renewal date, which is enough time to work on the customer's business case.
• Who owns renewals changes retention. Pete has seen GRR run lower when renewals are a finance function that sends invoices than when a dedicated customer success team owns them. That cost belongs in your margin, and its payoff belongs in your retention input.
• Price increases are not free expansion. Increases of 10% a year or more put pressure on the renewal. If your expansion input leans on price, lower the retention input with it.
• Contract terms split the base. The biggest distinction is between customers on auto-renew and those who are not. Run CLV for each group.
• Support cases tell a strange story. A customer with 0 cases in a year is a churn risk. So is one with 7 or more. A customer with 3 to 5 resolved cases is usually your happiest.
• Expansion room is not the same as health. A customer who has bought one product has possible upside. One who has bought everything is likely sticky but hard to upsell. Retention and expansion are different inputs for a reason.

Common CLV mistakes

• Using revenue instead of gross profit. It overstates CLV by the full cost to serve and makes every CAC look affordable.
• Mixing periods. Monthly revenue over annual churn, or the reverse, is off by a factor of 12.
• Dividing by 1 - NRR. Above 100% NRR it has no answer, and just under 100% it returns huge numbers. Cap and discount instead.
• Counting forever. At 1% monthly churn the simple formula assumes an 8.3 year average life. Check that against the age of your oldest cohort.
• One blended CLV. Enterprise and SMB averaged together describe neither. Compare each segment's CLV with that segment's CAC.
• One number with no range. CLV rests on a retention guess. Show the low and high case next to it.

ORM's take: CLV is a forecast, so treat it like one

Every CLV is a prediction of retention and expansion years out. Pete's rule for a forecast a board trusts applies here too: make it consistent, traceable and framed with a range, a low case, an on-target case and an upper bound. That is why the cohort tab shows CLV with logo retention 5 points lower and higher. If the low case still clears your CAC, the spend case is solid. If only the high case does, you are betting on retention you have not earned yet.

ORM forecasts renewals and expansion account by account, separately from new business, because they behave differently. A renewal has a known amount and date. A new deal does not. The retention and expansion that feed CLV then come from the same model that runs the revenue forecast, so CLV and the plan are read from one set of numbers.

Common questions

How do you calculate customer lifetime value?

Multiply average revenue per account by gross margin, then divide by the churn rate for the same period. An account paying $2,000 a month at 80% margin earns $1,600 of gross profit a month. At 1.5% monthly churn, CLV is $1,600 / 0.015 = $106,667. Keep the periods matched: monthly revenue with monthly churn, or annual revenue with annual churn. For expansion and discounting, use a capped cohort model.

What is a good CLV to CAC ratio?

The common floor for B2B SaaS is 3:1, the target OpenView Partners recommends: each customer returns three times what it cost to win. Below 1:1 you lose money on every customer you sign. Judge the ratio on gross profit CLV over a horizon you can defend, not revenue CLV counted forever, and read it next to CAC payback. A 3:1 ratio that takes four years to pay back still ties up a lot of cash.

What is a good customer lifetime value?

A CLV in dollars means little on its own, because it scales with price. A $100,000 CLV is strong for a product that costs $10,000 to sell and weak for one that costs $60,000. Compare CLV with the CAC of the same segment, check the payback period, and test the retention input. Benchmarkit puts 2025 gross revenue retention at 88%, a useful sense check for the churn number you enter.

How do you calculate CLV with a discount rate?

Project gross profit per starting account year by year, then divide each year by (1 + discount rate) raised to the number of years from today. Add the years up to a capped horizon. With annual billing in advance, year one is not discounted. Use the rate your finance team applies to other investments. The cohort tab above does this and shows the value year by year, with the Excel version in the formula table.

How do you calculate lifetime value for a SaaS company with expansion revenue?

Model retention and expansion separately. Each year, the share of accounts still paying is multiplied by their grown revenue, so retention x (1 + expansion) is your net revenue retention. When NRR is 100% or more, the shortcut gross profit / (1 - NRR) has no finite answer. Cap the horizon at a period your own cohorts support, discount it, and read the value year by year.

Is this a loan-to-value (LTV) calculator?

This page calculates customer lifetime value, which SaaS teams also call LTV or CLV. Loan-to-value is a lending ratio: the loan amount divided by the appraised value of the property or asset, used by mortgage and auto lenders. Same three letters, different question. If you are sizing a mortgage or a home equity loan, you want a loan-to-value calculator from your lender instead.