Customer Lifetime Value Calculator for Small Shops

What a regular leaves behind in a month, a year, and before they drift away.

Every argument for looking after the customers you already have runs into the same wall: nobody can say what one is worth. It is not a guess. It follows from four numbers you already know, and the one people think they are missing (how long a regular keeps coming) falls straight out of how many of them you stop seeing in a year.

Monthly value = average sale × margin × visits a month. Lifetime = monthly value × (12 ÷ the share of regulars you lose in a year).

• You can have the answer emailed to you. We use the address once, to send that one email, and then we are done with it: you are not added to any list and we do not email you again.
• Every figure here is GROSS PROFIT, not takings: what is left after the cost of what you sold, before rent and wages. Takings would make the numbers bigger and useless.
• A regular’s monthly value is what one visit leaves behind, times how often they come.
• How long they keep coming is 12 divided by your annual churn. Lose a quarter of your regulars a year and the average one stays four years.
• The lifetime figure is capped at ten years. At 1% churn the formula says a century, which is arithmetically right and commercially nonsense.
• A customer who leaves part-way through the year did not cost a whole year of profit, so the yearly churn cost counts them as half a year.
• The last line is the one that matters: what keeping one in ten of the leavers is worth. That is the number a retention decision actually turns on.

How do I calculate customer lifetime value for a small business?

Multiply the average sale by your gross margin to get what a visit is worth. Multiply that by visits a month, then by how many months an average customer keeps coming. That is 12 divided by the share you lose each year.

I do not know my churn rate.

Almost nobody does. Estimate: think of ten regulars from a year ago and count how many you still see. Even a rough answer changes the conclusion far less than you would expect, because the decision is usually about the first year.

Should I use revenue or profit?

Profit. A customer who spends $5,000 with you at a 20% margin is worth $1,000, and treating them as a $5,000 customer is how shops justify spending $2,000 to keep them.

Why is losing a customer cheaper than their annual value?

Because they do not all leave in January. Averaged across a year, a leaver costs you about half a year of their value, which is what this uses.

What is a normal churn rate for a cafe?

There is no published figure worth quoting for independent shops, and anyone giving you one is guessing. What matters is your own number this year against your own number last year.

Does a loyalty card reduce churn?

It gives a customer a reason to come back to you rather than the shop next door, and it gives you a way to notice when they stop. Whether it moves your number is something only your own figures can tell you, which is the honest answer.