Calculate CLV to understand long-term customer value and profitability
pm7Category: product-marketingCalculate CLV, CAC, and payback period to understand customer profitability
Customer Acquisition Cost
$50
Payback Period
2.0 months
Customer Lifetime Value
$900
Each customer costs $50 to acquire upfront and generates $300 in annual recurring revenue. At $25 monthly revenue, the acquisition cost is recovered in 2.0 months. Over the full 3 year customer lifespan, total lifetime value reaches $900, creating a 18.0:1 CLV:CAC ratio indicating Excellent unit economics.
Customer lifetime value represents total gross profit generated over a customer relationship, while customer acquisition cost is the one-time investment to acquire that customer. The CLV:CAC ratio measures unit economics efficiency—ratios above 3:1 indicate healthy margins, while ratios below 1:1 signal unsustainable business models where each customer loses money.
Payback period measures how quickly the upfront acquisition investment is recovered through customer profit. Shorter payback periods improve cash flow and reduce capital requirements for growth. SaaS businesses typically target 12-month payback periods, while e-commerce companies aim for immediate or near-immediate payback through first purchase margins.
Customer Acquisition Cost
$50
Payback Period
2.0 months
Customer Lifetime Value
$900
Each customer costs $50 to acquire upfront and generates $300 in annual recurring revenue. At $25 monthly revenue, the acquisition cost is recovered in 2.0 months. Over the full 3 year customer lifespan, total lifetime value reaches $900, creating a 18.0:1 CLV:CAC ratio indicating Excellent unit economics.
Customer lifetime value represents total gross profit generated over a customer relationship, while customer acquisition cost is the one-time investment to acquire that customer. The CLV:CAC ratio measures unit economics efficiency—ratios above 3:1 indicate healthy margins, while ratios below 1:1 signal unsustainable business models where each customer loses money.
Payback period measures how quickly the upfront acquisition investment is recovered through customer profit. Shorter payback periods improve cash flow and reduce capital requirements for growth. SaaS businesses typically target 12-month payback periods, while e-commerce companies aim for immediate or near-immediate payback through first purchase margins.