Sales · 6 min read

How to calculate customer lifetime value

Customer lifetime value (CLV or LTV) tells you how much a customer is worth over the whole relationship. It decides how much you can afford to spend to win one.

Updated 12 October 2026 · By the SuperForge team

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01The simple formula

CLV = average order value × purchases per year × years as a customer

Example: a café customer spends ₹350 per visit, visits 40 times a year and stays 3 years. CLV = 350 × 40 × 3 = ₹42,000 in revenue.

02The margin-based formula (for subscriptions)

CLV = (average monthly revenue per customer × gross margin %) ÷ monthly churn rate

Example: ₹2,000 per month, 70% margin, 4% monthly churn. CLV = (2,000 × 0.70) ÷ 0.04 = ₹35,000 in gross profit.

03Compare with acquisition cost

Customer acquisition cost (CAC) is what you spend in sales and marketing to win one customer. Many businesses aim for CLV of at least 3 times CAC.

04How to increase CLV

  • Onboard customers well so they stay.
  • Offer annual plans or packages.
  • Cross-sell related products.
  • Fix support issues fast; good service reduces churn.
  • Ask happy customers for referrals.

05Questions

What is a good CLV to CAC ratio?

A common benchmark is 3:1 or better.

Is CLV revenue or profit?

It can be either. Margin-based CLV is more useful for deciding how much to spend on acquisition.

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