LTV (Customer Lifetime Value) is the total revenue a business expects from a single customer over their relationship.
LTV = (Average Revenue Per User × Gross Margin %) / Churn Rate. For SaaS with 1% monthly churn and $100/mo ARPU at 80% margin: LTV = $8,000. LTV:CAC ratio < 1 means losing money; >3 indicates healthy unit economics. Cohort-based LTV (vs blended) gives more accurate signals for product-market fit.
LTV sets the ceiling on what you can afford to spend acquiring customers. Companies that chase growth without tracking LTV almost always discover the bill later.
A subscription business with $80 average monthly revenue per customer and 3% monthly churn has an average customer lifespan of ~33 months and an LTV of roughly $2,640 — the value the business expects to earn from each customer over their lifetime.
LTV is not the same as cumulative revenue per customer. The most useful definition uses gross margin (not revenue), because that is the money actually available to fund acquisition.
Compute LTV by cohort and segment, not as a single global number; meaningful patterns hide in averages and only show up when sliced by customer type.
LTV (Customer Lifetime Value) falls under the Business category.
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