Customer lifetime value (CLV): formula, calculation, and how to improve it
Customer lifetime value (CLV) is the total revenue a business expects from a single customer over the entire relationship, minus the costs of serving them. The standard SaaS CLV formula: Average Revenue Per Account x Gross Margin % / Monthly Churn Rate. For a $500/month customer with 75% gross margin and 5% churn: CLV = $7,500. That number can swing materially once AI spend per customer is built into gross margin, something many SaaS companies still don't do.