LTV
Lifetime Value (Customer Lifetime Value, CLV)LTV is the total gross profit a business expects to earn from a customer over the entire relationship.
LTV only becomes decision-useful once you're precise about two things: whether it's measured in revenue or profit, and over what time horizon. Revenue-based LTV overstates the number because it ignores cost of goods and service delivery. A 12-month LTV and a lifetime LTV for the same customer can differ by multiples, especially for subscription businesses with long average tenures.
The standard SaaS-style formula assumes a roughly constant churn rate, which lets you use 1 ÷ churn rate as the expected customer lifespan. That assumption breaks down for businesses with sharply front-loaded churn (most churn happens in month one, then survivors stick around a long time) — in that case, a cohort-based LTV calculation is more honest than the formula below.
LTV on its own tells you what a customer is worth. It only becomes a decision when you compare it to CAC — see LTV:CAC.
LTV (subscription/repeat model)
LTV = (Avg. Revenue per Customer per Month × Gross Margin) ÷ Monthly Churn RateExample
A subscription meal-kit service has ₹1,800 average monthly revenue per customer, a 70% gross margin, and 4% monthly churn.
LTV = (₹1,800 × 0.70) ÷ 0.04 = ₹31,500.
No single standard definition
There's no single universally agreed LTV formula — revenue-based vs. profit-based, gross vs. net, and the time horizon all vary by company. State your assumptions whenever you share an LTV number.
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