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Lifetime Value Calculator


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Hey - I am trying to find a good lifetime value calculator - the attached is what I am after, but the output doesn't look 'right"


For example, ARPA 500, Gross Margin 20%, Discount Rate 0, Churn 100% spits out a discounted residual value of 2680!  How is that possible when customer churn is at 100%?




Assuming I am correct in saying this must be wrong, does anyone know where I can find a good one.

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A for simple calculation of LTV you need the reciprocal of churn. So in this case, 17% means that on average each customer stays with Naked wines 5.88 years (1/.17). Average revenue is 197 per year so on average the LTV = 5.88*197= 1,158.82. Now you could go further and use a discount rate on the revenue and include gross margin or operating margin for total lifetime profit. For simplicity, let's say 6 years is the average customer lifespan. you would discount 197 each year.


Sum= $925

year 1 = 197

year 2 = 168

year 3 = 156

year 4 = 144

year 5 = 134

year 6 = 124


does that help?

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Sorry I am a bit confused about what you are asking. I just used the number that you provided me in a very simple calculation of how to apply it. The point of churn is to determine on average how long a customer will stay with the company.  If you sign up 100 people in year 1 with a 50% retention rate after the first year but a 10% churn after year 1 then you need to factor that into the equation. If revenue per customer increases/decreases (on an annual basis) with the # of years they stay on then you have to factor that in. 

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