Small or changing cohorts, zero churn, changing spend, and seasonal retention can make the constant-rate estimate unreliable.
Try this with your own numbersFormula and worked example
Approximate LTV = monthly revenue × contribution margin / monthly churn rate
| Input | Example |
|---|---|
| Monthly revenue per active customer | 120 |
| Contribution margin | 50 % |
| Monthly customer churn | 5 % |
| Calculated result | 1,200 per customer |
Choose reliable inputs
Include software licences, delivery time, revisions and ongoing support when costing a project. For this paid media agency calculation, use project time logs, licence invoices and retainer scopes and a consistent definition of one client month.
- Account management: include the portion belonging to this client month or reporting period, and record where the value came from.
- Creative: include the portion belonging to this client month or reporting period, and record where the value came from.
- Reporting: include the portion belonging to this client month or reporting period, and record where the value came from.
Use the same currency for every money input. Do not mix weekly costs with monthly revenue, or count the same expense in both an itemised cost and allocated overhead.
When does this lifetime-value shortcut mislead?
Small or changing cohorts, zero churn, changing spend, and seasonal retention can make the constant-rate estimate unreliable.
This simplified geometric model excludes discounting, acquisition cost, and changing cohorts.
What if this input changes?
If monthly revenue per active customer rises by 10%, this example changes by 120 per customer. This shows the effect of one change; it does not predict what will happen.
Open the calculator, save your baseline, then change the input supported by the least reliable estimate in your records. Compare both scenarios before committing to a price or capacity promise.