Work out how much gross profit a typical customer brings in over their lifetime, how long they stay, and whether your acquisition spend pays off. Free, no sign-up.
Average revenue per account (ARPA) each month.
Revenue left after the direct cost of serving the customer.
Share of customers lost each month.
Optional. Sales and marketing spend per new customer.
A common rule of thumb is a CLV to CAC ratio of at least 3 : 1. Below 1 : 1 each new customer costs more to win than they ever pay back. Well above 5 : 1 can mean you are under-investing in growth.
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Four businesses, and what their numbers say about how much they can spend to win a customer.
A $50 a month plan with healthy margins.
$50 per month, 80% gross margin, 5% monthly churn, $200 CAC.
Customers stay 20 months on average (1 / 5%). CLV is $50 x 80% x 20 = $800. CLV to CAC is 4 : 1 and CAC pays back in 5 months.
A store where customers buy a few times a year.
$60 average order, 5 orders a year, 40% margin, 36 month lifespan, $90 CAC.
$60 x 5 / 12 is $25 a month in revenue, $10 in gross profit. Over 36 months CLV is $360, a 4 : 1 ratio on a $90 CAC.
A low-priced plan that loses customers quickly.
$30 per month, 70% margin, 10% monthly churn, $250 CAC.
Customers last 10 months, so CLV is $210. At 0.84 : 1 every new customer costs more to win than they will ever return.
The SaaS example again, with churn cut from 5% to 4%.
$50 per month, 80% margin, 4% monthly churn.
Lifespan rises from 20 to 25 months and CLV from $800 to $1,000. A single point of churn is worth 25% more value per customer.
Rules of thumb for judging whether your lifetime value is healthy. They are starting points, not laws.
The most quoted rule of thumb. Below 1 : 1 growth loses money. Far above 5 : 1 often means you could afford to spend more on acquisition.
Payback period shows how long cash is tied up in each new customer. Shorter paybacks make growth far easier to fund.
Lifespan is 1 divided by churn, so small churn improvements compound. Cutting churn from 5% to 4% adds 25% to lifetime value.
Revenue-based CLV flatters businesses with high delivery costs. Margin-based CLV is the number you can safely compare against CAC.
Customers who get fast, accurate answers are more likely to stay. Bund AI answers on web chat and email around the clock using your own help content, resolves routine questions itself, and hands the rest to your team with full context.