LTV (Lifetime Value)
Customer Lifetime Value (LTV or CLV) is the total predicted revenue you'll earn from a customer over the entire duration of your relationship.
Formula
In depth
LTV is the most important long-term health metric for subscription businesses. A high LTV means customers stay long and expand — the foundation of a valuable SaaS.
LTV components: - ARPU: average monthly revenue per user - Gross Margin: how much of that revenue you keep - Churn Rate: how quickly customers leave
LTV improves by: reducing churn (the biggest lever), increasing prices, adding expansion revenue (upsells/seats), and improving gross margin.
LTV:CAC of 3× is the minimum benchmark. Top-performing SaaS companies achieve 5–8× LTV:CAC.
Real example
ARPU: $100/month, Gross Margin: 75%, Monthly Churn: 2.5%. LTV = $100 × 0.75 ÷ 0.025 = $3,000. If CAC is $500, LTV:CAC = 6× — excellent.
Tools & calculators
Related terms
MRR (Monthly Recurring Revenue)
Monthly Recurring Revenue (MRR) is the predictable, normalized monthly revenue generated from all active subscriptions. It's the north star metric for SaaS companies.
CAC (Customer Acquisition Cost)
Customer Acquisition Cost (CAC) is the total cost of acquiring one new paying customer, including all marketing and sales spend.
Churn Rate
Churn rate is the percentage of customers (or revenue) that cancels or doesn't renew in a given time period. It's the single most important retention metric for subscription businesses.
ARPU (Average Revenue Per User)
Average Revenue Per User (ARPU) is the average monthly revenue generated per paying customer. It's the building block for LTV, MRR projections, and pricing decisions.
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