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Customer Lifetime Revenue from an Annual Cohort

Estimate customer lifetime revenue using annual purchase value and frequency with average customer lifespan.

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Calculator inputs

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How to use this calculator

  1. Enter the known values in the units shown. Results update as you type.
  2. Where results are editable, change one to solve backwards. Lock a value to hold it fixed.
  3. Use the worked example to check the method. Reset restores the starting fields.

Use the result with context

Results are estimates for planning and education. Confirm rates, taxes, fees, and legal requirements with the relevant institution or a qualified professional before making a financial decision.

Formula and method

Annual revenue of 100,000 from 1,000 purchases and 100 customers gives 100 per purchase and ten purchases per customer per year. With a three-year average lifespan, modeled lifetime revenue is 3,000 per customer.

Lifetime revenue per customer = average purchase value × annual purchases per customer × average lifespan in years

Worked example

Enter these known values and leave the other values blank.

Show annual cohort inputs
Determine total revenue, number of customers and purchases
Revenue during one year
100000 USD
Purchases during that year
1000
Customers in the matched cohort
100
Sum of customer lifespans
300 yrs
Average purchase value
100 USD
Purchases per customer per year
10
Annual revenue per customer
1000 USD
Average customer lifespan
3 yrs
Modeled lifetime revenue per customer
3000 USD

Assumptions and limitations

  • The purchase frequency must be annual because the lifespan is converted to years. Monthly purchase data must first be annualized consistently; using monthly frequency directly understates this model by a factor of twelve.
  • Use the same customer definition and cohort when calculating purchase averages and mean lifespan. The formula assumes that annual purchase behavior remains representative over the modeled lifespan.
  • This result is revenue, not profit or discounted economic value. Margins, acquisition and servicing costs, changing retention, growth and discounting are excluded.
  • Customer and purchase counts must be positive; revenue can be zero. Lifespan must be positive. Its unit selector uses fixed 365.25-day years and average months of 30.4375 days.
  • Use a consistent currency when comparing amounts. Optional currency conversions use captured reference factors, not live exchange rates, bank quotes or fees.

Common questions

Why is the result called lifetime revenue?

The model multiplies sales revenue per customer per year by years of customer activity. It does not deduct costs or discount future cash flows, so it should not be read as lifetime profit.

What does sum of customer lifespans mean?

Add the lifespans of the customers included in the count using the same time unit. Dividing that sum by the customer count gives the mean lifespan.

References

The calculation equations, inverse formulas, units, and input rules were imported from this source. Bookify provides the interface and equation solver.

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