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Customer lifetime value calculator
Built for freelancers and agencies: start from what a project is worth and how long clients stay, and see what a client is worth to you and how much you can spend to win one.
What a typical client pays per project or per month of retainer.
Use 12 for a monthly retainer.
What's left after direct costs per project: subcontractors, ads you resell, software for that client.
3 means each client should bring back 3 times what it cost to win them.
Lifetime value (gross profit)
$10,500
- Lifetime revenue
- $15,000
- Revenue per client per year
- $7,500
- Average client lifetime
- 2 years
- Max you can spend to win a client
- $3,500
- Months to earn that back
- 8.0
Estimates only, not financial advice. Count your own hours in acquisition cost too: a 3-hour proposal at your hourly rate is part of it. Nothing you type leaves your browser.
The formula
- Yearly revenue per client = average project value × projects per year.
- Client lifetime = years a client stays, or 1 ÷ yearly churn rate.
- CLV (revenue) = yearly revenue × lifetime.
- CLV (gross profit) = CLV revenue × gross margin.
- Max acquisition cost = CLV gross profit ÷ your target ratio.
Example: a designer with $2,500 projects, three per client per year, clients who stay two years and a 70% margin has a CLV of $10,500 in gross profit. With a 3 to 1 target, spending up to $3,500 to win a client still makes sense.
Finding your own numbers
Pull last year's invoices and group them by client. Average project value is total invoiced ÷ number of projects. Projects per year is projects ÷ active clients. For retention, count how many of the clients you worked with two years ago still sent work last year; if 6 of 10 did, churn is about 40% and clients stay about 2.5 years.
What to do with it
The max acquisition cost tells you what a discovery call, a free sample or a referral fee is worth. If a client is worth $10,500 in profit, spending two unpaid hours on a tailored proposal is cheap. If it's worth $600, it isn't, and you need a shorter sales process or a higher price. To see how many leads that process needs each month, try the sales pipeline calculator.
IN SHORT
Customer lifetime value (CLV) for a service business is average project value × projects per year × years a client stays × gross margin. If clients leave at a yearly churn rate, they stay 1 ÷ churn years on average: 40% churn means 2.5 years. Divide CLV by a target ratio, often 3, to get the most you should spend winning a client, including your own hours on calls and proposals.
Prices and limits as of .
Questions
How do you calculate customer lifetime value?
How do I find average client lifetime from churn?
What is a good CLV to CAC ratio?
What counts as client acquisition cost for a freelancer?
Should I use revenue or profit for CLV?
How can I raise customer lifetime value?
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