Accounting Customer Lifetime Value (Per-Unit) Calculator
Estimate the net lifetime value of one customer using monthly revenue, direct costs, servicing costs, churn rate and acquisition cost.
Overview
This Accounting Customer Lifetime Value (Per-Unit) Calculator estimates the revenue, contribution, and net value expected from one typical customer. Enter average monthly revenue, direct delivery costs, servicing costs, monthly churn, and customer acquisition cost to review customer-level unit economics.
How it works
The calculator estimates customer lifetime by dividing one by the monthly churn rate expressed as a decimal. It multiplies monthly revenue and costs by that estimated lifetime. Monthly contribution equals revenue less direct and servicing costs. Gross customer lifetime value is the total contribution before acquisition cost, while net customer lifetime value subtracts customer acquisition cost. This is a simplified steady-state estimate and does not include discounting or changes in customer spending over time.
How to use this calculator
- 1Enter the average monthly revenue generated by one customer.
- 2Add the direct cost of goods or service delivery per customer each month.
- 3Include recurring customer-specific servicing costs.
- 4Enter the monthly churn rate for a comparable customer cohort.
- 5Add the acquisition cost allocated to one customer.
- 6Review the estimated net lifetime value and supporting figures.
Example Calculation
Average monthly revenue per customer
$200
Monthly direct cost per customer
$60
Monthly servicing cost per customer
$20
Monthly customer churn rate
5%
Customer acquisition cost
$300
Net customer lifetime value
$2,100
At a 5% monthly churn rate, the estimated customer lifetime is 20 months. Monthly contribution is 120, gross lifetime value is 2,400, and net customer lifetime value is 2,100 after a 300 acquisition cost.
Frequently asked questions
What is customer lifetime value on a per-unit basis?
Per-unit customer lifetime value estimates the total economic contribution of one typical customer over the expected relationship period.
How is expected customer lifetime calculated from churn?
This calculator uses one divided by the monthly churn rate as a decimal. For example, 5% monthly churn implies an estimated average lifetime of 20 months.
What costs should be included in monthly direct costs?
Include costs that rise when you serve another customer, such as product costs, fulfilment, transaction charges, hosting allocation, or service delivery costs where appropriate.
Should customer acquisition cost be included in CLV?
It is useful to show both values. Gross lifetime value measures contribution before acquisition spending, while net lifetime value subtracts the acquisition cost attributed to the customer.
Does this calculation include the time value of money?
No. It uses a simplified undiscounted model. A discounted cash flow approach may be more suitable for long customer lifetimes or detailed financial planning.
Why might actual customer lifetime value differ from this result?
Revenue, costs, churn, pricing, customer mix, expansion revenue, and retention patterns can change over time, so actual results may vary.
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Assumptions and warnings
Assumptions
- The churn rate is assumed to remain constant throughout the customer relationship.
- Average monthly revenue and customer-specific costs are assumed to remain unchanged over time.
- Direct costs and servicing costs are treated as variable costs attributable to each customer.
- The calculation does not discount future cash flows for the time value of money.
- Results are estimates and may differ from actual customer behaviour and accounting treatment.
Warnings
- This calculator provides an estimate only and is not financial or accounting advice.
- Use actual cohort data and your organisation's accounting policies when making material business decisions.