Free customer lifetime value calculator with churn rate
Enter one month of customer counts and your revenue per account. The churn rate and the lifetime value update as you type, with the formulas shown.
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Short answer
Customer lifetime value (CLV) is the gross profit you can expect from one customer before they leave: average revenue per account per month × gross margin ÷ monthly churn rate. Monthly churn is the customers lost in a month divided by the customers you had at the start of it.
How to use the customer lifetime value calculator
- Enter one month of customers. Type the paying customers on the first day of the month, the customers who cancelled during the month and the new customers who joined. The churn rate appears as you type.
- Enter revenue and margin. Type the average revenue per account per month (ARPA) in any currency, and your gross margin as a percentage.
- Check the churn rate it uses. One month can be unusual. To use an average over a longer period, type it in Monthly churn (%), optional. Lifetime value then uses that rate.
The calculator runs in your browser. Your numbers are never sent to a server.
How to calculate churn rate
Monthly churn rate = customers lost during the month ÷ customers at the start of the month × 100.
New customers are not in the division. If they were, a month with many sign-ups would show a lower churn rate even when the same number of existing customers left. The calculator shows new customers separately, as the customer count at the end of the month and the net growth.
Count only customers who were with you at the start. If a customer joins and cancels in the same month, leave them out of "lost", or the rate can go above 100%. The calculator stops with a message when more customers are lost than were there at the start.
How to calculate customer lifetime value
CLV = ARPA × gross margin ÷ monthly churn rate.
| Part | What it means | Where to find it |
|---|---|---|
| ARPA | Average revenue per account per month | Monthly recurring revenue ÷ paying customers |
| Gross margin | Share of revenue left after the cost to serve | Revenue minus hosting, payment fees and support, ÷ revenue |
| Churn rate | Share of customers lost each month | The churn part of this calculator |
The idea is simple: 1 ÷ churn is the average number of months a customer stays. At 3% churn, that is 1 ÷ 0.03, about 33.3 months. Multiply the gross profit per month by the months, and you have the value of one customer.
A worked example
A software company starts the month with 400 customers. 12 cancel and 30 new customers join.
- Churn: 12 ÷ 400 × 100 = 3%.
- Customers at the end: 400 − 12 + 30 = 418, a net growth of 4.5%.
- Retention: 97%.
Average revenue per account is 80 per month and the gross margin is 75%.
- Gross profit per customer: 80 × 0.75 = 60 per month.
- Average lifetime: 1 ÷ 0.03 = about 33.3 months.
- CLV: 60 ÷ 0.03 = 2,000.
If the company cuts churn to 1.5% with the same revenue and margin, CLV doubles to 4,000. Churn is in the denominator, so small changes in churn move CLV more than small changes in price.
Monthly churn and yearly churn
Do not multiply monthly churn by 12. Each month you lose a share of the customers who are still there, so the effect compounds. At a constant monthly rate, yearly churn is 1 − (1 − monthly churn)12. At 3% per month, that is about 30.6% per year, not 36%. The calculator shows it as Churn over 12 months.
Assumptions and honest limits
The simple formula is useful for planning, but it makes assumptions. Know them before you put the number in a plan:
- Churn stays the same. In practice new customers often churn faster than customers who have stayed a year. Use a churn rate averaged over 6 to 12 months, or calculate CLV for each customer group.
- Revenue per customer stays the same. Upgrades, seats and price changes are left out. If customers usually spend more over time, the formula understates CLV.
- No discounting. Money in three years is worth less than money today. For long lifetimes, the simple CLV is higher than a discounted one.
- Zero churn has no answer. A month with no cancellations would give an infinite value. The calculator says so and asks for a longer average instead.
- Averages hide groups. If a few large customers bring most of the revenue, calculate their CLV separately.
How to use CLV
Compare CLV with the cost to win a customer (marketing and sales spend ÷ new customers). A common rule of thumb for subscription companies is a CLV of at least three times that cost. Also track the months it takes to earn the cost back. A CLV that is close to the cost to win a customer means growth costs more than it brings in.
CLV also helps you decide what support is worth. If better support keeps a few more customers each month, the change in CLV shows the value in money. Track satisfaction next to churn with the CSAT calculator to see whether the two move together.
Where support can lower churn
- Find the tickets that come before cancellations, and fix the causes behind the most common ones.
- Answer setup questions fast in the first weeks, when new customers are most likely to leave.
- Write clear help pages for repeat questions, so customers get an answer at any hour.
If repeat questions are a large part of your tickets, a support chatbot that answers only from your own help pages can take them and send the rest to your team.
Frequently asked questions
How do you calculate customer lifetime value?
Multiply the average revenue per account per month by your gross margin, then divide by the monthly churn rate. With revenue of 80 per month, a 75% margin and 3% churn, CLV is 80 × 0.75 ÷ 0.03 = 2,000.
How do you calculate churn rate?
Divide the customers who cancelled during the month by the customers you had at the start of the month, and multiply by 100. New customers are not in the division, so a month with many sign-ups does not hide churn.
Why use gross margin and not revenue?
Revenue overstates what a customer is worth, because each customer also costs money to serve: hosting, payment fees and support. Gross margin keeps only the profit, so you can compare CLV with what you spend to win a customer.
What if no customers churned this month?
Then the formula divides by zero and has no finite answer. Use the average monthly churn of the last 6 to 12 months in the optional churn field. One quiet month does not mean customers stay forever.
How does monthly churn turn into yearly churn?
Not by multiplying by 12. At a constant monthly rate, the share of customers still with you after a year is (1 − monthly churn) to the power of 12. At 3% a month that leaves about 69.4%, so yearly churn is about 30.6%.
How can support lower churn?
Fast, correct answers to common questions remove a frequent reason to cancel. Track which questions come before cancellations, write clear help pages for them, and make sure customers can reach a person when the pages do not answer.
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