How the Customer Lifetime Value Calculator works
Sales per year is your price times how many times a year you visit.
Sales while they stay is that times the number of years a typical customer sticks with you.
Profit is those sales times your profit margin. If customers send you others, each referral is counted as another customer worth the same profit.
Fair to spend is a simple rule of thumb: about a fifth of that profit. It's a guide, not a rule, and your own numbers may say more or less.
Tips from the trade
- Keeping a customer one more year is often worth more than finding a new one. Answer quickly and show up when you say you will.
- A small thank-you for referrals, like a free visit, costs little next to what a new regular is worth.
- Track how long your customers really stay. Our client trackers show it for you.
A worked example
Here's the example that's already filled in above, so you can see how the Customer Lifetime Value Calculator works before you enter your own numbers.
- Price per visit$50
- How often you visitEvery week
- Your profit margin25%
- Years a customer usually stays3
- New customers each one sends you, over that time0.5
The result: sales per year $2,600; sales while they stay $7,800; profit while they stay $2,925; fair to spend to win one $585.
Each customer like this is worth about $2,925 in profit, counting the customers they send you. Spending up to about $585 to win or keep one still leaves most of that profit.
Related free tools
- Review Request Text Writer: short, friendly texts asking customers for a review, ready to copy and send.
- Negative Review Reply Writer: calm, professional replies to a negative review, for fair, unfair and misunderstood complaints.
- Prepay Discount Calculator: how big a discount you can give for prepaying the season and still come out ahead.
When you need more than the free Customer Lifetime Value Calculator
This calculator answers one quick question. Running a business means doing it on every job, with your own rates saved and a quote you can send.
Customer Lifetime Value Calculator questions
What is customer lifetime value?
It's the total a customer brings you while they stay with you. For a service business, it's mostly price × visits a year × years they stay, and the profit from that is what really matters.
How long do customers usually stay?
It varies a lot by trade and by how well you look after them. Look at your own records: how many of last year's customers are still with you?
How much should I spend to get a customer?
Less than the profit they bring. This tool suggests about a fifth of it, which leaves most of the profit for you. If customers stay longer, you can afford a bit more.
Should I count referrals?
Yes, if your customers really do send you others. Enter how many a typical customer sends while they're with you. Half a customer each is a reasonable start if you're not sure.