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.

For example

A customer pays 2,000 a month at 70 percent margin and stays 30 months, so their lifetime value is roughly 42,000 rupees.

Go deeper

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. Open forentrepreneurs.com →

The Dangerous Seduction of the Lifetime Value (LTV) Formula Above the Crowd · article The essential counterweight: Gurley on how the LTV formula flatters founders and where its assumptions quietly break down. Open abovethecrowd.com →

Related terms

Also in Starting Up

See how founders actually handle this on Money, pricing and metrics, part of the Starting Up hub.

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