Lifetime Value

Also called LTV, CLV, and Customer Lifetime Value

The total gross profit you expect from a customer across their whole relationship with you. It turns a monthly price into the real long-run value of winning that customer.

LTV = average revenue per customer x gross margin x average customer lifetime

Why it matters

LTV is the ceiling on what you can afford to pay to acquire a customer. The LTV to CAC ratio, roughly 3 to 1 is the rule of thumb people quote, is one of the fastest reads on whether a business model works.

Worth your time

SaaS Metrics 2.0 For Entrepreneurs · guide The reference every SaaS founder gets sent eventually. It builds LTV, CAC, and payback up from first principles with the charts that make them click.

Related terms

Customer Acquisition Cost Churn Unit Economics
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