The most common and simple formula for measuring average customer lifetime value is the average CLV equals, the average amount of money customers spend per year in your business, multiplied by the average of years customers deal with your business. The "lifetime" time period will differ from business to business and may even be much shorter than a year.
In this article we will show why CLV is so important and how to calculate it, plus a free Excel calculator to help you determine the average value of your customers.
Average Customer Lifetime Value is calculated by:
Average CLV = average money spend per year x average number of years
For example, if your clients spend an average of $3,000 per annum in your business, and your customers deal with you for an average of 2 years. That means each customer has a lifetime value to you of $6, 000. ($3,000 x 2 years = $6 000)