All terms
Growth
LTV (Lifetime Value)
The total revenue (or gross profit) a customer generates over the lifetime of the relationship.
In plain English
How much money a customer is worth to you across their whole lifetime — not just the first month.
Example
$50/mo customer, 80% gross margin, 4% monthly churn → average customer life ~25 months → LTV ≈ $50 × 0.8 × 25 = $1,000.
Formula
LTV ≈ ARPU × Gross margin × (1 / Monthly churn)
(Use cohort retention math for higher accuracy.)
Why it matters
LTV bounds what you can profitably spend on acquisition. The LTV:CAC ratio is the cleanest signal of whether you can scale acquisition.
Common mistakes
- Computing LTV on revenue instead of gross profit (overstates by 2-4×)
- Using a single churn number when retention curves differ wildly by cohort