Formula
CLV = Average order value × Purchases per year × Lifespan × Gross margin rateWhat this CLV model estimates
This calculator estimates lifetime gross profit: average order value multiplied by annual purchase frequency, expected lifespan and gross margin. An $80 order, four annual purchases, three years and 45% margin produces an estimated CLV of $432.
Use cohorts when possible
Historic cohorts provide better inputs than company-wide averages. Recent customers may have different retention, order values and acquisition channels from older cohorts.
Limits of a simple model
The result does not discount future cash flows and assumes purchasing behavior remains stable. Subscription businesses may prefer retention- or churn-based models; mature finance teams may use probabilistic models.
Assumptions
- Purchase rate and margin remain stable.
- Discount rate and retention cohorts are excluded.
Sources and methodology
CalcMotive publishes the formula and assumptions so you can decide whether the estimate fits your use case. See our methodology standards.