Full Definition
Customer Lifetime Value (LTV or CLV) represents the total revenue a business can expect from a single customer over the entire duration of their relationship. It's a fundamental metric for understanding customer profitability and setting acquisition budgets.
Simple Formula: LTV = Average Revenue Per User (ARPU) × Average Customer Lifespan
Detailed Formula: LTV = (ARPU × Gross Margin) ÷ Monthly Churn Rate
LTV:CAC Ratio
- Below 1:1: Losing money on every customer (unsustainable)
- 1:1 to 3:1: Unprofitable or break-even; needs improvement
- 3:1: Healthy SaaS benchmark
- 5:1+: Very strong; potentially under-investing in growth
Real-World Example
A customer pays $99/month with 85% gross margin for an average of 24 months. LTV = $99 × 0.85 × 24 = $2,019.
Related Terms
The total cost of acquiring a new customer, including marketing, sales, and related expenses.
The percentage of customers or revenue lost over a specific period, a key SaaS health metric.
The direct revenues and costs associated with a single unit of a business model (typically per customer).
Predictable, recurring revenue from subscriptions, measured monthly (MRR) or annually (ARR).
The strategy a company uses to generate income from its product or service.
Investor Outreach Template Pack
Get our proven email templates, pitch frameworks, and investor research guides — used by 1,000+ founders.
- Cold email templates that get 40%+ open rates
- Follow-up sequence frameworks
- Investor research checklist