Lifetime Value
LTV
The total revenue a customer is expected to generate over their entire relationship with your company.
Definition
Lifetime Value (LTV), also written as CLV or CLTV, is the predicted total revenue a single customer will generate over the full duration of their relationship with your company. The simplest formula for subscription businesses is: LTV = ARPU ÷ Churn Rate. More sophisticated models incorporate gross margin, expansion revenue, and time-discounted cash flows.
Why It Matters
LTV sets the ceiling on how much you can profitably spend to acquire a customer. When combined with CAC, it determines whether your business model is viable at scale. The classic benchmark is LTV:CAC ≥ 3:1 with a CAC payback period under 12 months for venture-backed businesses.
Example
If your average customer pays $100/month and your monthly churn rate is 2%, your LTV is $100 ÷ 0.02 = $5,000.