Use the spreadsheet below to determine how much money an average customer is worth to your business. This tool can also help you determine how much you should be spending on marketing for your company and how much money would be appropriate to spend to acquire each new customer.
Average Customer Lifespan – The # of years someone remains a customer of your business.
Customer Retention Rate – Over a given period of time, the % of customers who will re-purchase, when compared to an equal, preceding period of time.
Profit Margin per Customer – Your average profit margin (%) per sale.
Discount Rate – Used in discounted cash flow analysis, this is the interest rate used to determine the present value of future cash flows; usually between 8 – 15%.
The “Average Gross Margin per Customer Lifespan” value that is calculated represents your profit margin multiplied by the average customer spend.
The “Average CLV” value represents 2 things – how much a customer is worth to your business in lifetime sales, and a suggested top limit on how much you should spend to acquire a new customer.