What Is Customer Lifetime Value (CLV)?
By BRIX Editorial Team · Updated
Customer lifetime value (CLV or LTV) is the total gross profit a customer brings your business over every job they buy from you. For a trades business, multiply average ticket by jobs per year, by years they stay, by your gross margin. It shows what a new customer is really worth and what you can spend to win one.
Key takeaways
- CLV = average ticket × jobs per year × years retained × gross margin.
- Use gross profit, not revenue. A $3,600 customer at a 50% margin is worth $1,800.
- Years retained ≈ 1 ÷ (1 − annual retention rate). Keeping 80% of customers each year means about five years on average.
- Referrals add value the formula misses. Track them separately rather than inflating CLV.
- CLV sets your ceiling on customer acquisition cost and tells you what a missed call really cost.
How does customer lifetime value work?
Most trades customers don't buy once. The homeowner who calls for a $300 furnace repair this winter may buy a maintenance plan, a water heater from your plumbing side, and a $12,000 system replacement in four years. Customer lifetime value adds all of that up so you stop judging customers, and marketing, by the first ticket alone.
It also changes how you see a missed call. A caller who goes to voicemail isn't a lost $450 ticket. If your average customer is worth $1,800 in gross profit over their life, that's what walked away. The missed call calculator shows the first-ticket loss; CLV shows the rest.
How do you calculate customer lifetime value?
Calculate customer lifetime value by multiplying your average ticket by the number of jobs a customer buys per year, by the number of years a typical customer stays with you, and by your gross margin. Pull the first three numbers from your job history for customers who started at least two or three years ago.
CLV = Average ticket × Jobs per year × Years retained × Gross margin
- Average ticket
- average revenue per job for the customer group you're measuring
- Jobs per year
- jobs per active customer per year
- Years retained
- average years a customer keeps buying; ≈ 1 ÷ (1 − annual retention rate)
- Gross margin
- (revenue − materials − direct labor) ÷ revenue, as a decimal
Try your own numbers in the customer lifetime value calculator.
Customer lifetime value by trade
CLV is shaped by how often a customer needs you. Recurring trades build value through frequency; repair trades build it through a few big jobs spread over years; one-time project trades build it mostly through referrals.
| Trade | How value builds | Illustrative CLV inputs | Biggest CLV lever |
|---|---|---|---|
| HVAC | Repairs, tune-ups, then a replacement | $450 ticket, 1.6 jobs/yr, 5 yrs | Maintenance plans that keep you first in line for the replacement |
| Plumbing | Occasional repairs plus water heaters and repipes | $400 ticket, 1.2 jobs/yr, 6 yrs | Being the plumber they save in their phone |
| Roofing | One replacement; repairs and gutters later | $14,000 job, then little for years | Referrals and neighbor jobs, not repeat sales |
| Electrical | Service calls, then panels, EV chargers, generators | $500 ticket, 1 job/yr, 5 yrs | Follow-up offers after the first job |
| Landscaping and lawn care | Weekly mowing plus seasonal add-ons | $50 visit, 30 visits/yr, 4 yrs | Retention from season to season |
| Cleaning | Recurring biweekly cleans | $150 clean, 26 cleans/yr, 2 yrs | Keeping clients past the first few months |
| Pest control | Quarterly plan plus one-time treatments | $120 visit, 4 visits/yr, 4 yrs | Plan renewals |
Customer lifetime value vs. customer acquisition cost
Customer lifetime value is what a customer is worth; customer acquisition cost is what you paid to win them. Put them together and you know whether growth pays. If CLV is $1,800 and CAC is $300, each new customer returns six times what they cost. If CAC creeps toward CLV, you're buying revenue at no profit.
How do you increase customer lifetime value?
- Sell recurring service. A maintenance agreement or membership program raises jobs per year and retention at the same time.
- Offer the right add-ons. Well-matched upselling raises average ticket without adding trips.
- Stay in touch. Seasonal reminders and follow-ups keep you as the company they call, not whoever ranks first that day.
- Fix it right the first time. Callbacks cost goodwill. Track first-time fix rate.
- Ask for reviews and referrals. They don't show up in the formula, but they lower acquisition cost for the next customer.
Common CLV mistakes
- Using revenue instead of gross profit. Revenue CLV overstates what you can spend to win a customer.
- Using your best customers as the average. Calculate from all customers who started in a given year, including the ones who never came back.
- Counting a customer forever. Without a retention rate, CLV becomes a fantasy number.
- Mixing commercial and residential. Their tickets, frequency and retention differ. Calculate CLV for each.
- Ignoring it after you calculate it. CLV should set your maximum CAC and justify spending on answering and following up every lead.
Frequently asked questions
How do you calculate customer lifetime value?
Multiply average ticket by jobs per year, by years the customer stays, by your gross margin. For example, $450 × 1.6 jobs a year × 5 years × 50% margin gives a customer lifetime value of $1,800 in gross profit.
What's the difference between CLV and LTV?
None in practice. CLV (customer lifetime value) and LTV (lifetime value) describe the same idea. Some people calculate them on revenue and others on gross profit, so always say which one you mean.
How do I find my customer retention rate?
Take the customers who bought from you in one year and count how many bought again the next year. Divide repeat customers by the starting group. If 400 of 500 came back, retention is 80%.
What is a good customer lifetime value?
Good is relative to what it costs you to win a customer. A lifetime value several times your customer acquisition cost leaves room for overhead and profit. Compare the two numbers rather than using another company's CLV.
Should I include referrals in lifetime value?
Track them separately. Referrals are real value, but adding them to CLV makes the number hard to verify. A simple approach is to note what share of new customers came from referrals and treat that as a bonus on top of CLV.
How does CLV help with marketing decisions?
It tells you the most you can afford to pay to win a customer. If a customer is worth $1,800 in gross profit, spending $300 to win one is healthy. Without CLV, owners often judge marketing by the first ticket and cut channels that were actually profitable.
Related
- Customer Lifetime Value CalculatorFree CLV calculator for trades businesses: see what a customer is worth in lifetime revenue and gross profit, and how much you can spend to win one.
- What Is Customer Acquisition Cost (CAC)?Customer acquisition cost is everything you spend to win one new customer. See the CAC formula, a roofing example, payback math and LTV to CAC by trade.
- What Is Upselling?Upselling means offering a better option or add-on the customer actually needs. See trade examples, take-rate math, the FTC cooling-off rule, pitfalls.
- What Is a Maintenance Agreement?What a maintenance agreement is, what to include, how to price one so every visit makes money, and how HVAC, plumbing and electrical shops structure them.
- What Is a Membership Program for Home Services?How a home service membership program works, what perks to include, how to price tiers and measure churn, with examples for HVAC, plumbing and electrical.
- What Is Average Ticket?Average ticket is revenue divided by jobs invoiced. Learn how to calculate it by job type, why a blended number misleads, and how trades shops raise it.
- What Is Gross Margin?Gross margin is the share of revenue left after direct job costs. The formula, what counts as COGS for trades, and why service and install margins differ.
- Missed Call Revenue CalculatorFree calculator: see how much revenue missed calls cost your trades business per week, month and year. Enter calls, miss rate, booking rate and ticket.
- CRM for Home Service Businesses That Fills Itself InOne record for every customer, lead, call, job, quote and invoice, filled in by the AI that answers your phone. A CRM built for trades businesses.
- Lead Follow-Up Automation That Chases Every Lead and Estimate for YouAutomatic text and email follow-up for every lead and open estimate, so quotes don't go cold while you're on jobs. Built for trades businesses.