LTV (Customer Lifetime Value)
The total revenue a customer generates over their entire relationship with your product.
What it means
Lifetime Value estimates the total revenue you can expect from a single customer account from the moment they sign up until they churn. It's calculated by combining your average revenue per account with your retention rate. LTV tells you the upper bound of what you can spend to acquire a customer while still being profitable.
Formula
LTV = ARPU ÷ Monthly Churn Rate (simplified)
Why it matters
LTV, combined with CAC, determines the unit economics of your business. If your LTV is $3,000 and your CAC is $500, you have a 6:1 ratio - excellent. If that ratio drops below 3:1, you either need to reduce acquisition costs, increase pricing, or improve retention.
What is LTV in SaaS?
LTV (Lifetime Value) is the total revenue a customer generates over their entire relationship with your SaaS product. It helps you understand how much a customer is worth and how much you can spend to acquire one.
How do you increase LTV?
Reduce churn, increase pricing, upsell/cross-sell, improve product engagement, and deliver consistent value through updates and education.
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