Lifetime Value
Also: LTVCustomer Lifetime ValueCLVCLTV
The total revenue or profit you expect from a customer over the entire relationship, before they churn.
Why it matters
Lifetime value tells you what a customer is actually worth, which sets the ceiling on what you can sensibly spend to acquire and keep them. It shifts focus from one-off acquisition to the full economics of the relationship. Without it, you are flying blind on whether your acquisition spend pays back.
How it is calculated
LTV = average revenue per customer per period x gross margin x average customer lifespan (or average gross-margin revenue / churn rate)
What good looks like
LTV is most meaningful as a ratio to CAC and is best calculated on gross profit, not revenue, so it reflects real economics. Beware inflated LTV from optimistic lifespan or churn assumptions, small changes in churn swing it dramatically.
In the European market
European customers can behave differently on the two inputs that drive LTV: contracts and procurement norms in markets like Germany often mean longer, stickier relationships once you are in, which can lift lifespan, while pricing pressure varies by country. Build LTV on per-market retention rather than a blended figure, because a sticky DACH cohort and a higher-churn cohort elsewhere average into a number that describes neither.
Related terms
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