Also called: Lifetime Value, Customer Lifetime Value, CLV
TL;DR
Lifetime Value, the total margin a customer is expected to generate over their entire relationship with the company.
LTV is the present value of all margin generated by a customer over their relationship. The simplest formula is ARPU × gross margin × customer lifetime (1 ÷ churn rate). The more accurate version discounts future cash flows and accounts for expansion.
LTV is most useful in conjunction with CAC. The LTV:CAC ratio (>3 is healthy in SaaS) and the CAC payback period (<18 months for venture-scale SaaS) together describe whether the unit economics support venture-scale growth.
LTV = ARPU × Gross Margin ÷ Monthly Churn Rate
Simplest formulation; production-grade LTV adds discounting and per-cohort churn segmentation.
ARPU $50/mo, gross margin 80%, monthly logo churn 2%. LTV = ($50 × 80%) ÷ 2% = $2,000 per customer. Combined with $400 CAC, LTV:CAC = 5×.
LTV and the LTV:CAC ratio appear on the Unit Economics slide. Investors discount LTV claims that aren't backed by stable cohort retention.
LTV shows up most often in these scoring rubrics and investor profiles, jump straight to who cares about it and how to pitch them.
Customer Acquisition Cost, the total sales and marketing spend required to acquire one new paying customer over a given period.
The ratio of customer lifetime value to customer acquisition cost, a headline measure of unit economics health.
The number of months required for the gross profit from a customer to repay the cost of acquiring them.
The percentage of revenue remaining after subtracting cost of goods sold (COGS), reflecting the unit economics of delivering the product.
The percentage of customers (logos) who cancel in a given period, regardless of how much revenue they represented.
Long-form deep dives on the slides LTV most often shows up on.
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