Customer Lifetime Value (CLV)
The total revenue a business can expect from a single customer account throughout the entire duration of their relationship.
Customer lifetime value represents the total amount of money a customer will spend with your business over the entire time they remain your customer. If an average client stays with your landscaping company for 4 years and pays $200 per month, their CLV is $9,600. This number is critical because it tells you how much you can afford to spend acquiring a new customer while still being profitable.
Many small business owners focus too heavily on the first transaction and not enough on the full relationship. A new customer might only spend $50 on their first visit, but if they come back monthly for three years, they’re actually worth $1,800. Understanding this changes how you think about marketing spend, customer service, and retention efforts. It’s often far more cost-effective to keep an existing customer than to acquire a new one.
To calculate a simple CLV, multiply your average purchase value by average purchase frequency per year, then multiply by the average number of years a customer stays with you. Even a rough estimate is valuable. Once you know your CLV, compare it to your cost per acquisition. A healthy business typically has a CLV that’s at least three times the cost of acquiring that customer.
Increasing CLV is one of the most powerful growth strategies available. You can do it by improving customer retention (reducing churn), increasing purchase frequency through loyalty programs or regular communication, and raising average order value through upselling and cross-selling. Small improvements in any of these areas compound over time.