What is a customer actually worth to you?
Most owners price the first sale and forget the rest. See what one customer is worth over their whole life with you, and why keeping them beats chasing new ones.
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Customer lifetime value = Average sale x Purchases per year x Years they stay x Profit margin
This number is what one customer is worth to you over their whole life with your business, in profit, not revenue. It works like a tab that runs for years: each visit adds a little, and the total is bigger than any single sale suggests. A customer spending $2,500 six times a year for 5 years at a 35 percent margin is worth $26,250, because 2,500 x 6 x 5 x 0.35 comes to exactly that. The trap is pricing your effort against the first sale. If the first sale barely breaks even but the customer stays for years, walking away from them is expensive. The next question a smart operator asks: what does it cost me to keep one customer a year longer, and how does that compare to winning a brand new one?
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The other six questions
How the math works
A customer’s lifetime value is the average sale, times how many times they buy in a year, times the years they stay, times your profit margin. A customer who spends $2,500 six times a year for 5 years at a 35 percent margin brings you $26,250 of profit over their life with you.
Common questions
How do I calculate what a customer is worth?
Multiply four numbers: average sale, purchases per year, years they stay, and your profit margin. That is the profit one customer brings you over their whole time with you, assuming today’s numbers hold, which is the honest base case.
What is customer lifetime value?
The profit one customer brings you over their whole time buying from you, not just the first sale. It is the number that tells you what you can afford to spend to keep a customer, or to win another one like them.
Why does keeping a customer matter more than winning a new one?
An existing customer already buys from you, so one more year of them is kept profit with no hunting cost. When you know the profit a customer brings per year, you can compare the cost of keeping one against the cost of replacing one with real numbers instead of instinct.
Built by Finalysis, the financial intelligence platform for owner operators.
This is a planning shape, not a forecast. It assumes a customer keeps buying at the same rate and margin for as long as they stay, which is the honest base case. Real customers vary, so use this to see the size of the prize, then act on it. Nothing you type leaves your device.