CLV tells you the total profit a customer generates over their relationship with your business. It should guide your customer acquisition spend. If CLV is $500, you should never pay more than $100-150 for an acquisition.
Customer Lifetime Value:
Max CPA:
How to Use This Tool
Enter average order value.
Enter annual purchase frequency.
Enter average customer lifespan in years.
Enter gross margin percentage.
Click Calculate to see CLV and max cost-per-acquisition.
The Formula
CLV = (AOV x Purchase Rate x Lifespan) x Gross Margin%. Max CPA = CLV / Lifespan. Rule of thumb: CAC should be < 1/3 CLV.
Why It Matters
Your subscription has 500 customers at $50/month with 5% monthly churn. Each customer's lifetime value is $950 — meaning you need to spend less than $950 on acquisition to profitably grow.