lifetime value

Lifetime Value

The total revenue a business expects to receive from a single customer over the entire relationship. Also called CLV (Customer Lifetime Value). The acronym LTV also exists as a stub entry; this entry provides full context.

When you'd see it: Unit economics discussions, investor materials, and pricing decisions. The numerator in the LTV:CAC ratio. Subscription businesses (SaaS, media, D2C subscription) calculate LTV constantly because the entire model depends on customer retention — a churned customer can't generate LTV. E-commerce LTV is calculated from purchase frequency and average order value.

Why it matters: LTV sets the ceiling on what you can spend to acquire a customer (CAC) and remain profitable. A $500 LTV means you can profitably spend up to $500 in CAC — anything below is margin. Increasing LTV (through retention, upsell, or cross-sell) directly improves the unit economics math and unlocks more aggressive acquisition spending.

Common mistakes: Using predicted LTV based on optimistic retention assumptions rather than realized cohort data. LTV is future revenue — it's always a forecast. Validate predictions against actual cohort retention curves before building financial models on them. Also: using gross LTV (ignoring COGS and service costs) when you need net LTV for unit economics decisions.

Related CAC, churn, NRR, customer acquisition cost, unit economics