Customer Lifetime Value (CLV) Calculator
Work out how much one customer is worth over their entire relationship with your business. Compare against acquisition cost to see whether your unit economics work.
How to use
- 1
Enter the average order value — what a typical purchase looks like in AED.
- 2
Enter purchase frequency per year. A SaaS subscription billed monthly = 12. A restaurant customer who eats with you twice a month = 24. A wedding venue = 0.5 (most customers come once every 2 years).
- 3
Enter customer lifespan in years. How long the average customer stays before churning. If you don't know, use 3 years as a baseline and adjust based on what you observe.
- 4
Enter gross margin. CLV based on revenue is misleading — the AED you actually keep matters. A 60% gross margin business has dramatically different CLV than a 20% margin one.
- 5
Optionally enter Customer Acquisition Cost (CAC). The calculator then shows your LTV/CAC ratio (3+ is healthy) and your payback period in months (under 12 months is good).
Frequently asked questions
3:1 is the SaaS rule of thumb — your customer value should be at least 3× what you spent to acquire them. 1:1 means you're not making money. 5:1+ means you could be spending more on acquisition to grow faster. Most e-commerce targets 3:1, premium SaaS targets 5:1.
CAC = (total sales and marketing spend in a period) ÷ (number of new customers acquired in that period). Include ad spend, sales team salaries, recruiter fees for sales hires, and amortised tooling. For an SME on a budget: just total ad spend ÷ new customers is a reasonable starting figure.
Payback period = months until your customer's monthly gross profit covers what you spent to acquire them. Under 12 months is healthy. Over 24 months means you're financing growth with cash you don't yet have. SaaS companies obsess over this metric because it determines fundraising frequency.
Profit. A AED 300/month customer with 20% margin generates AED 60/month of contribution. A AED 100/month customer with 80% margin generates AED 80/month. Same revenue (over 5x longer relationship) but the lower-revenue customer is more profitable. Always use gross margin in your CLV formula.
Less than you'd hope. CLV depends on customer lifespan, which you only know AFTER customers churn. Most CLV calculations are projections based on early-cohort retention curves. They're directionally useful for unit-economics decisions but should be treated as estimates, not facts.
Implicitly yes — your customer lifespan estimate IS your churn assumption. Lifespan = 1 / monthly churn rate. If 5% of customers churn each month, average lifespan is 1/0.05 = 20 months. So a 4-year lifespan estimate implies 2% monthly churn. Check your churn data to validate.
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Source: Standard CLV / unit economics formula · Last verified 2026-06. This tool provides estimates only and is not legal, tax or financial advice. Always verify your specific situation with the relevant UAE authority or a licensed advisor before taking action.