Online CLV Calculator | Customer Lifetime Value Formula

Free online CLV calculator

Use our free online CLV calculator to quickly and accurately determine your Customer Lifetime Value for your ecommerce, helping you make smarter business decisions and maximize long-term profitability.

This formula is the result of years of headaches (I started in 1998), constantly trying to calculate CLV accurately across platforms like Magento, custom-built ecommerce sites, OpenCart, PrestaShop, Zen Cart, Joomla, and more… thank you, Shopify, for simplifying everything!

Formula references:

1. Last 12 months’ Net Revenue
   Go to your ecommerce platform (Shopify, WooCommerce, Magento), and run a report to show the last 12 months’ net revenue.
   
2. Last 12 months’ Total Orders
   Go to your ecommerce platform (Shopify, WooCommerce, Magento), and run a report to show the last 12 months’ total orders.
   
3. Average Profit Margin
   Enter your Average Profit Margin for all your products as a decimal number.
   For example, if you have 3 products with the following margins:
   Product 1 – 60% Margin
   Product 2 – 70% Margin
   Product 3 – 50% Margin
   Average Margin is: 60%
   Enter 0.60 into the calculator.
   
4. Last 12 months’ Purchase Frequency
   There are several ways to calculate this, but the most common one, especially for Shopify, is by running a report called “Sales by Customers.” This will show all the orders each customer has placed.
   Once you have the data, simply calculate the average number of orders per customer. This is your purchase frequency. You can use Google Sheets for this.
   Another simple way is to calculate:
   Last 12 months’ Total Orders by Customer / Last 12 months’ Total Number of Customers.
   
5. Last 12 months’ Customer Acquisition Cost (CAC)
   This is your Customer Acquisition Cost (CAC), which shows how much you’re spending to get a new customer.
   The most common formula, in my experience, is this:
   Total Cost of Sales, Marketing, and Tools in the Last 12 Months” / “Total Number of New Customers in the Last 12 Months.
   
6. Customer Lifetime
   This is the one I aim you to leave in 1, as I explain below, but it’s up to you.
   If not, then use the formula: 1 / churn rate.
   The way to calculate your churn rate is:
   Total Customers lost in the last 12 months / Total customers at the beginning of the last 12 months.

All you need to know about Customer Lifetime Value (CLV)

What does CLV mean for an ecommerce?

Customer Lifetime Value (CLV) is a metric that estimates the total revenue an ecommerce can expect to earn from a single customer throughout the entire duration of their relationship.

There are many formulas to calculate CLV, but in our over 20 years of experience, this is the one that fits best:

Average Order Value Formula:

Purchase Frequency Formula:

Customer Lifetime Formula:

Churn Rate Formula:

Due to recent economic uncertainties and rapid changes in the U.S. market, our Customer Lifetime Value calculator focuses on data from the last 12 months, using what’s known as “Linear CLV.”

For this reason I suggest that you set  “Customer Lifetime” to 1 (last 12 months).

What is Linear CLV?

Linear CLV estimates customer value by assuming consistent purchasing behavior over a specific period, to provide a straightforward forecast of future revenue.

The specific period we will use is 1 (one year, the last 12 months).

Frequently Asked Questions about Customer Lifetime Value

What is the 80/20 rule in CLV?

This is a common question, related to the Pareto Law, which consists in:
80% of your high lifetime value customers come from 20% of your marketing efforts. 
That’s not always the case, but the way you should interpret this is that “the majority” of your income comes from the minority of your efforts. I can assure you that this is 100%, in my more than two decades of online experience.

What is a good CLV rate?

We can say that you have a “good” or “healthy” Customer Lifetime Value (CLV) when it’s at least 3 times greater than your Customer Acquisition Cost (CAC).
The greater the CLV the better, of course, but it should be AT LEAST three times higher than your CAC.

Is it difficult to calculate CLV?

It’s usually very difficult for all ecommerce owners or managers, as formulas get more complicated and twisted.
The formula above can be calculated in less than an hour, and you can repeat it every month as this is one of the most important KPIs for the health of your online business.

Is a Customer’s Lifetime Value a KPI?

Customer Lifetime Value (CLV), along with Customer Acquisition Cost (CAC), is one of the most important KPIs for ecommerce businesses.
You should always set goals in your 90-day roadmaps that include initiatives to increase CLV, helping your ecommerce business scale.
Important: you should set up an alarm when your CLV:CAC ratio drops below 3 in order to take measures to improve it.

There are many CLV formulas but in my experience, this is the best one yet.

If you have any questions about Customer Lifetime Value calculations, or if you have a better way to obtain them, let’s chat! Leave a comment below and I’ll get back to you :)