Accounting Customer Lifetime Value Calculator FAQ
Answers to common questions about customer lifetime value, gross margin, retention, discount rates, and acquisition cost.
This FAQ explains what the calculator estimates, which inputs it uses, and how to interpret gross and net customer lifetime value results.
General customer lifetime value questions
Core concepts used by the calculator.
What does this customer lifetime value calculator estimate?
It estimates the present value of expected gross profit from a typical customer over a selected period, then deducts customer acquisition cost.
Is customer lifetime value the same as customer lifetime revenue?
No. Lifetime revenue measures sales, while this calculator estimates discounted gross profit after applying gross margin.
What is the difference between gross CLV and net CLV?
Gross CLV is discounted gross profit before acquisition cost. Net CLV is gross CLV less the acquisition cost entered.
Inputs and formula questions
How the main calculation inputs affect results.
What should annual revenue per customer include?
Use the average yearly revenue associated with one active customer, using a consistent definition across the analysis.
What does gross margin mean in this calculator?
It is the percentage of revenue remaining after direct costs of providing the product or service.
What retention rate should I enter?
Enter the annual percentage of customers expected to remain active from one year to the next.
What does the analysis period do?
It sets the maximum number of future years included in the discounted gross-profit estimate.
Discounting and interpretation
How present value and results are handled.
Why discount future gross profit?
Discounting gives less present value to profit expected further in the future and provides a time-aware estimate.
Does a higher discount rate lower CLV?
Generally, yes. A higher rate reduces the present value assigned to future gross profit.
Can net customer lifetime value be negative?
Yes. This can occur when the estimated discounted gross profit is lower than the acquisition cost entered.
What does a net CLV to CAC ratio show?
It expresses estimated net lifetime value relative to acquisition cost. It is a descriptive comparison, not a universal performance standard.
Accuracy and use
Practical boundaries of the estimate.
Does the calculator include fixed overhead?
No, unless your chosen gross margin already reflects costs you intend to include. Use a margin definition consistent with your analysis.
Does the calculator include expansion revenue or refunds?
Not separately. Reflect them in the revenue or margin inputs only if that approach is appropriate for your estimate.
Is this result financial or accounting advice?
No. It is an educational estimate based on the assumptions entered and should be reviewed alongside your own records and policies.
How is net customer lifetime value calculated?
Net CLV equals discounted gross customer lifetime value minus one-time customer acquisition cost.
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