Customer Lifetime Value (LTV) Calculator (Explained):
What is Customer LTV?
Customer LTV is the expected amount of money a single customer will pay you during their interaction with your business over a certain period of time. The lifetime of the customer varies from one niche to another.
For Example: If you are dentist, the average customer visits the dentist every 3 months and possible every 6 months.
How Does The Customer LTV Calculator Work?
We will demonstrate this by plugging in some numbers.
Imagine, that you own a restaurant and you know that the average amount a customer spends per visit is 30$ and out of this, you are spending 20% in cost of Goods and Services.
That same customer visits your restaurant, 50 times a year over a period of 3 years. He also referred 3 of his friends to visit your restaurant.
This makes the total LTV of the customer to be $1,440.
In other words, each customer bring you $1,440 in profit. If you paid $400 to acquire a customer, will that be a good deal for you? It's like you have a money making machine where you put 1$ in and get more than 3$ out.
Why is this Customer LTV Calculator important?
If you spent $2,000 to acquire one customer whose LTV value is $1,440 then your Ad campaigns are at loss and your business will be at loss.
This is an important metric for you to know to be able to estimate how much are you willing to spend in order to acquire a single customer. Your customer LTV should be at least 2x the amount spent on Ads to acquire a customer.
After completing this exercise, we will now compliment it with the other free tools offered by Leadgend Marketing:
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