If you only look at “today’s sale,” marketing always feels expensive.

If you look at what a customer is worth over months or years, marketing suddenly becomes a controlled investment instead of a guessing game.

That is what customer lifetime value is about.

In this guide, I am going to walk you through how to find the lifetime value of a customer in simple, plain English, so you can:

• Stop stressing over every ad dollar
  
• Confidently decide what you can afford to spend to win a new customer
  
• See exactly where to focus to grow your revenue and profit
  

If you have the calculator embedded on this page, keep it open. As you read, you can plug in your own numbers and get your real customer lifetime value in a few minutes.

If you want to purchase our calculator spreadsheet so you can use it at anytime & save your data you can do that here. 

What Is Customer Lifetime Value In Plain English?

Customer Lifetime Value (often shortened to LTV or CLV) is simply:

The total amount of money a typical customer brings into your business over the entire time they buy from you.

Most small business owners are trained to think in “today money”:

• “How much did I make from this ad today?”
  
• “Did this client pay for themselves right away?”
  

Lifetime value gets you thinking in “relationship money”:

• “If I take good care of this customer, how much will they spend with me this year?”
  
• “If they stay with me for three years, what is that relationship worth?”
  

Once you know that number, you will make very different decisions about:

• Your pricing
  
• Your offers
  
• Your ad budget
  
• How aggressively you follow up and rebook

The Simple Numbers You Need Before You Calculate LTV

You only need four basic numbers. If you can log into your payment processor or booking system, you can find these.

1. Average Order Value (AOV)

This is the average amount a customer spends in a single visit or transaction.

How to get it:

• Pick a time period, like the last 3 or 6 months.
  
• Take your total revenue for that period.
  
• Divide by the number of orders.
  

Example:

• Revenue: 25,000
  
• Number of orders: 500
  
• 25,000 ÷ 500 = 50 average order value
  

So, on average, each time someone buys, they spend 50.

2. Purchases Per Year

This is how many times a typical customer buys from you in one year.

Examples:

• A haircut client who comes every 6 weeks = about 8 visits per year
  
• A monthly bookkeeping client = 12 purchases per year
  
• A holiday photography client might only book once a year
  

If you are not sure, start with your best guess based on your regulars, not your one-off customers.

3. Customer Lifespan (In Years)

This is how long a typical customer stays with you before they drift away.

Examples:

• A loyal bookkeeping client: 4 to 5 years
  
• A gym membership: maybe 1.5 to 3 years
  
• A seasonal rental guest who returns most summers: 3 years
  

Again, if you are not tracking yet, estimate. You can refine this later.

4. Profit Margin (Optional, But Powerful)

Revenue is how much money comes in. Profit is how much you actually keep after paying for:

• Supplies
  
• Labor
  
• Rent, software, and overhead
  

Profit margin is the percentage of each sale that is profit.

Example:

• You charge 100
  
• Your costs for that service are 60
  
• Your profit is 40
  

40 is 40 percent of 100, so your profit margin is 40 percent.

You can calculate LTV using revenue only, but when you bring profit into the picture, the number becomes much more useful for marketing decisions.

The Easiest Lifetime Value Formula For Small Business Owners

Now that you have your four simple numbers, here is the basic formula.

Step 1: Revenue Lifetime Value

In words:

Lifetime Value = Average Order Value × Purchases Per Year × Customer Lifespan

Example:

• Average order value: 50
  
• Purchases per year: 6
  
• Customer lifespan: 3 years
  

50 × 6 × 3 = 900

So the revenue lifetime value of a customer is 900.

That means the average customer, over their whole relationship with you, brings in about 900 in sales.

Step 2: Profit-Based Lifetime Value (The Real Decision Number)

Revenue is nice to know. Profit is what you can spend and still sleep at night.

In words:

Profit-Based LTV = Revenue LTV × Profit Margin

Using the example above:

• Revenue LTV: 900
  
• Profit margin: 40 percent (0.4)
  

900 × 0.4 = 360

So the profit-based lifetime value is 360.

In plain English:

A typical new customer is worth about 360 in profit over the life of the relationship.

That is the number you want in your head before you decide on ad budgets, offers, and promotions.

A Real-World Example: LTV For A Service Business

Let us use an example that fits a lot of Twinning Pros clients: a service provider who works with repeat clients, like a stylist, cleaner, or local pro.

Let’s use a realistic example based on a salon in Louisiana.

On the menu you have:

Highlights / New Growth / Haircut (full appointment)

• Level 6: 301
  
• Level 3: 267
  

Highlights / New Growth (color-only, no cut)

• Level 6: 263
  
• Level 3: 245
  

To keep the math simple, we will use the average for each type of appointment:

• Full highlights + new growth + haircut average:
  (301 + 267) ÷ 2 = 284 per visit (before tip)
  
• Color-only highlights / new growth average:
  (263 + 245) ÷ 2 = 254 per visit (before tip)
  

Now add a realistic 20 percent tip to each visit:

• Full visit with tip:
  284 + 20% of 284 (56.80) = 340.80 per visit
  
• Color-only visit with tip:
  254 + 20% of 254 (50.80) = 304.80 per visit
  

Now let’s look at how a typical color client behaves:

• They come in for 2 full appointments per year
  (highlights / new growth / haircut)
  
• They come in for at least 4 color-only appointments per year
  (highlights / new growth, no cut)
  
• Average client lifespan: 3 years
  
• Profit margin on the service portion: 35 percent

Service Revenue And Tip Over A Year

First, look at one year.

Service revenue (no tip):

• 2 full visits: 2 × 284 = 568
  
• 4 color-only visits: 4 × 254 = 1,016
  

Total service revenue per year:

568 + 1,016 = 1,584

Tips:

A 20 percent tip is calculated on the service price, so:

• 20 percent of 1,584 = 316.80 in tips per year
  

Total spend per year (service + tip):

• 1,584 + 316.80 = 1,900.80
  

So in a typical year, this client is spending about 1,900.80 with your salon when you include tips.

Lifetime Value Over 3 Years (Service + Tip)

Over a 3-year relationship:

• Service revenue: 1,584 × 3 = 4,752
  
• Tips: 316.80 × 3 = 950.40
  
• Total spend including tips: 1,900.80 × 3 = 5,702.40
  

From the client’s point of view, they are spending around 5,700 with your salon over three years in this one color lane.

Profit-Based LTV (Service Only)

From the business perspective, your true margin is on the service price, not the tip, because tips usually go straight to the stylist.

Using the service revenue over 3 years:

• Service revenue LTV: 4,752
  
• Profit margin: 35 percent
  

Profit-based LTV:

4,752 × 0.35 = 1,663.20

So this client is worth about 1,663 in profit to the business over three years on the service side alone.

Now Add Retail: Purple Shampoo + Conditioner 2–3 Times Per Year

Let’s add a simple, realistic upsell that fits this client:

• Purple shampoo: 49
  
• Purple conditioner: 52
  
• Total for the bundle: 101 each time they buy it
  

You mentioned that a typical client could easily buy this 2–3 times per year to maintain their color.

Retail revenue per year:

• At 2 purchases per year: 2 × 101 = 202
  
• At 3 purchases per year: 3 × 101 = 303
  

Over 3 years:

• Lower end (2 per year): 202 × 3 = 606 in retail revenue
  
• Higher end (3 per year): 303 × 3 = 909 in retail revenue
  

If we assume about a 50 percent margin on retail products:

• Retail profit (low end): 606 × 0.5 = 303
  
• Retail profit (high end): 909 × 0.5 = 454.50
  

Now combine that with your service profit:

• Service profit over 3 years: 1,663.20
  
• Total profit with retail (low end): 1,663.20 + 303 = 1,966.20
  
• Total profit with retail (high end): 1,663.20 + 454.50 = 2,117.70
  

So this one client is now worth around 1,970 to 2,120 in profit over three years when you factor in:

• 2 full cut + color appointments per year
  
• 4 color-only appointments per year
  
• A realistic 20 percent tip
  
• A purple shampoo and conditioner bundle 2–3 times per year

What This Means For Your Marketing Decisions

Most stylists and salon owners only think about the first appointment.

If you only look at one visit, you might say:

• “A first-time color client is worth 280 to 340, so I can only spend 20 or 30 to bring them in.”
  

When you look at the full picture:

• Lifetime total spend including tips: about 5,700
  
• Lifetime profit including service and retail: around 2,000
  

Suddenly, investing 100, 150, or even 200 to attract a dream color client feels a lot more logical.

That is the power of lifetime value.

You are no longer making marketing decisions based only on day one. You are building your strategy around the real value of a client who comes back, maintains their color, buys retail a few times a year, and stays with you for years.

Where To Find Your Numbers (Even If You Are Not Tracking Yet)

If you are thinking “I do not have that kind of data,” let’s make it practical.

Use What You Already Have

Check:

• Your payment processor: Stripe, Square, PayPal
  
• Your e-commerce platform: Shopify, WooCommerce
  
• Your booking tool: Acuity, Calendly, GlossGenius, Fresha, etc.
  
• Your accounting tool: QuickBooks, Xero, Wave
  

From these, you can usually export:

• Total revenue for a period
  
• Number of orders or invoices
  
• List of repeat customers
  

If this still feels overwhelming, start small:

• Choose one core service or one main package.
  
• Look at your past 6 to 12 months of clients for that one thing.
  

Start Simple, Then Refine

Your first LTV number does not need to be perfect. Think of it as Version 1.

• Start with educated guesses for purchase frequency and lifespan.
  
• Update your math every 6 to 12 months as you track more.
  

Over time, even rough numbers get more accurate, and your decisions get sharper.

How To Use Customer Lifetime Value To Make Smarter Marketing Decisions

Knowing your LTV is nice. Using it is where the money is.

Here are practical ways to put it to work.

1. Set a Realistic Budget For New Customers

If your profit-based lifetime value is 360, would you still panic over spending 40 to get a customer?

Probably not.

A simple starting rule:

• Be willing to spend a small percentage of your profit-based LTV to win a new customer.
  
• As your system gets better (and your follow up improves), you can afford to spend more.
  

Example:

• Profit-based LTV: 360
  
• You decide you are comfortable spending up to 100 to acquire a new customer
  
• If your ads and content bring you new customers for 40 to 60 each, you are in a very healthy range
  

This mindset lets you outspend competitors who are still trying to get everything “as cheap as possible” and quitting ads too early.

2. Choose Better Marketing Channels

When you know LTV, you stop chasing cheap clicks and start chasing quality customers.

For example:

• Channel A: 15 per lead, but most people buy once and disappear.
  
• Channel B: 50 per lead, but those clients stay 2 to 3 years and refer friends.
  

If you only look at day-one numbers, Channel A looks “cheaper.”

If you look at LTV, Channel B is the goldmine.

3. Design Offers That Earn Back Your Cost Faster

You can also design offers to bring people in, knowing what they are worth over time.

Examples:

• A “new client” intro package that gets someone to try you once.
  
• A first clean or first consult at a special price, with a clear invitation to keep working together.
  
• A membership, retainer, or maintenance plan that increases visit frequency.
  

Your goal is not to squeeze every dollar out of the first transaction. Your goal is to turn the first transaction into a long-term relationship, so they reach their full lifetime value with you.

How To Increase Lifetime Value (Without Being Pushy)

Once you know your LTV, you can increase it by working on a few simple levers.

1. Increase Visit Frequency

You do not have to be aggressive to do this. You just have to be intentional.

Ideas:

• Pre-book the next appointment before they leave
  
• Set up email or SMS reminders for maintenance, renewals, or check-ins
  
• Create simple memberships or recurring packages
  

Every extra visit per year, per customer, increases LTV without needing brand new leads.

2. Increase Average Order Value

This is about adding value, not pushing random extras.

Ideas:

• Offer logical add-ons that solve related problems
  
• Bundle services into “good, better, best” packages
  
• Recommend products or services you genuinely believe will help them
  

If your average ticket rises from 120 to 135 while still serving customers well, your LTV grows automatically.

3. Keep Customers Longer

Retention is one of the most overlooked parts of lifetime value.

Simple retention moves:

• Onboarding new clients with a clear welcome and next steps
  
• Checking in after the first visit or project to make sure they are happy
  
• Sending helpful content, tips, or seasonal reminders that actually serve them
  

Happy customers stay longer, spend more, and refer friends. All of that increases LTV.

4. Drive Referrals and Reactivations

Referrals and win-backs are LTV boosters.

Ideas:

• Simple referral thank-yous or rewards
  
• “We miss you” emails or texts to customers who have gone quiet for 6 to 12 months
  
• Special offers for returning clients that make it easy to rebook
  

Each referral and reactivated client adds to the value of the relationship without more cold traffic.

Common Mistakes Small Business Owners Make With LTV

When I look at client accounts, I see the same patterns over and over.

Mistake 1: Only Looking At Today’s Sale

If you judge every campaign by whether it produced instant profit on day one, you will kill things that could have built you a profitable client base.

Look at your numbers over 3, 6, and 12 months, not just the first week.

Mistake 2: Treating All Customers As Equal

Some customers spend more, stay longer, and send friends. Others are one-time bargain hunters.

Your highest lifetime value customers are the ones you want to attract more of.

When you know your LTV, you can start to see patterns:

• Where did your best customers come from?
  
• What offer did they respond to?
  
• What content did they see?
  

Then you double down on those sources.

Mistake 3: Guessing Instead of Recording

If you are not capturing emails or phone numbers and you are not tracking repeat visits, you are guessing.

Even a simple spreadsheet that lists:

• Customer name
  
• First purchase date
  
• Last purchase date
  
• Total spent
  

will give you clearer insight than trying to remember it in your head.

Mistake 4: Never Updating The Numbers

Your offers, pricing, and client base change over time. Your LTV will too.

Make it a habit to revisit your lifetime value at least once or twice a year. Each time, your decisions get more accurate.

Quick Start Action Plan: Calculate Your LTV In One Afternoon

Here is how to turn this from “good information” into a real number you can use.

1. Pick one main service or offer.
   Do not try to do your whole business at once. Start with your primary money-maker.
   
2. Grab your numbers.
   From your payment or booking system, get:
   
   • Total revenue for that service
     
   • Number of orders
     
   • A sense of how often regulars come back
     
   • How long they tend to stay
     
3. Calculate your LTV.
   Plug your numbers into:
   
   • The LTV calculator on this page, or
     
   • Your own spreadsheet with the formulas from this post
     
4. Decide on an acquisition budget.
   Based on your profit-based LTV, decide:
   
   • What are you comfortable spending to win one new customer?
     
5. Choose one lever to improve.
   Decide whether you will focus on:
   
   • More visits per year
     
   • Higher average order value
     
   • Longer lifespan
     
   • More referrals
     
6. Set a simple 30-day experiment.
   For example:
   
   • “For 30 days, we will pre-book next appointments at checkout.”
     
   • “For 30 days, we will add one simple add-on offering to every qualifying service.”
     

At the end of those 30 days, revisit your numbers and see what changed.

Ready To Know Your Numbers And Use Them?

Lifetime value is one of those concepts that separates “busy” businesses from intentional, profitable ones.

You do not need to become a data analyst. You just need:

• A simple calculator
  
• A few real numbers
  
• A plan to act on what you see
  

If you want to keep going from here, you have a few options:

• DIY it
  Use the calculator and turn this post into your own worksheet. Start plugging in your services, one by one, and keep a running list of LTV numbers.
  
• Learn the bigger SEO and marketing strategy behind the math
  Inside my SEO course, I show small business owners how to pair numbers like lifetime value with content, SEO, and funnels so you can attract more of your best-fit clients instead of chasing everyone.
  
• Partner with Twinning Pros
  If you are ready for a more done-with-you or done-for-you approach, we can help you build the strategy, the website, and the tracking so your marketing decisions are finally based on real data instead of guesswork.
  

Whichever path fits you best right now, the first step is the same:

Calculate your lifetime value, even if it is a rough estimate. Once you know what a customer is truly worth, everything else in your marketing starts to make a lot more sense.