Customer Lifetime Value (CLV) Calculator

How to use our lifetime value calculator

Determining CLV (customer lifetime value) is vital for any business, and with TextMagic’s free CLV calculator, you can leave the complicated maths to us. Input just a few critical pieces of information to determine your CLV accurately.

We have taken all of the work out of customer lifetime value calculation. All you have to do to measure customer lifetime value is to provide us with some business data and follow these five easy steps:

• Step #1 - Input the number of active paying customer accounts that your business has. This number should be placed in the “Number of Customers” field.

• Step #2 - Next, establish how much money your customers pay your business every month. This amount is known as the total Monthly Recurring Revenue (MRR) and should be typed into the appropriate field of our CLV calculator.

• Step #3 - Enter the total average dollar value your business earns for each account per month.

• Step #4 - The next step is to determine your company’s gross margin. This amount represents the portion of each dollar of revenue that your company retains as profit. Gross margin is expressed as a percentage. You can enter it into the fourth field of the customer lifetime value calculator.

• Step #5 - Lastly, determine your company’s churn rate. This is the total amount of customers that leave your business each month. If you are unsure of your churn percentage, you can quickly determine it using TextMagic’s Churn Rate Calculator. Once you have this percentage, enter it into the fifth and final field of the CLV calculator.

Click the green “Calculate” button once all your data has been entered into the fields. Within a few moments, the CLV calculator will determine the lifetime value of your customers. This represents the average net profit you will make from one customer account during their lifetime within your company.

You can download and save the results on your computer or device or request a shareable link to your CLV information.

Why you should use the lifetime value calculator

TextMagic’s customer lifetime value calculation tool is useful for any business looking to determine the average net profit earned from each customer. Not only is this calculator fast and straightforward to use, but it provides vital insight into your company’s customer base and can help you determine the health of your business.

Why we built this tool

We created this tool as a free method for businesses to gain information about their customer base. We know how complicated it is to measure different business metrics like CLV, conversion rates, and more. As a growing SaaS, we want to help other companies stay on top of their most important metrics.

Benefits of using our free lifetime value calculator

To devise a proper marketing or advertising campaign and to perform budget planning, you must understand how much your customers are currently spending and how much they will spend in the future. Without this data, all of your planning will be done blindly.

Other benefits of calculating CLV include:

• Better decision making by helping your marketing team spend less time acquiring low-value users;

• Determining the health of your business and planning short and long-term KPIs;

• Measuring the financial impact of all marketing initiatives.

Frequently Asked Questions

What is customer lifetime value, and why is it important?

Customer lifetime value (also known as CLV) is the total average profit margin that you can expect to earn from one customer over their entire lifetime or business relationship with your company.

This figure is important because the higher the CLV, the better your company’s profits will be. Finding ways to increase your CLV will allow your company to grow exponentially through marketing and other business models.

What is the difference between CLV (customer lifetime value) and LTV (lifetime value)?

Customer lifetime value (CLV) and Lifetime Value (LTV) are the same things when speaking in this context. However, many times when people refer to LTV, they are speaking of a different business metric called Loan To Value. To avoid any miscommunication, it is better to use the term CLV.

How calculating CLV can help you better understand customers

It is crucial that a business measure more than just its profitability. Metrics such as channel entrances, acquisition, and CLV are also vital. Adding CLV to a business’s standard reports can help predict long-term performance or identify specific groups of customers who make purchases more frequently.

How can you improve customer lifetime value?

There are many different ways that you can improve customer lifetime value, such as:

• Improving customer loyalty;

• Increasing the average order size;

• Increasing the average order frequency;

• Creating personalized email or other marketing campaigns targeting high-value clients.