What is LTV (Lifetime Value)?
The total revenue a customer generates over their entire relationship with your business. The denominator of every marketing ROI calculation.
Also known as: customer lifetime value, CLV, LTV/CAC
Lifetime value is the total revenue (or profit, depending on the version) a single customer generates from acquisition through churn. For service businesses, LTV includes: the initial sale, any repeat work, referrals attributable to that customer, and any upsells.
LTV is what makes high CAC defensible. If your customer LTV is $10,000 and your CAC is $500, you can profitably acquire customers at much higher CAC than a competitor with $1,500 LTV. The healthy ratio: LTV / CAC > 3, ideally > 5.
Measuring LTV correctly requires: longitudinal data (you need cohort data over 12-36 months), proper churn modeling (a customer who hasn't bought in 12 months is probably gone), and discount-adjusted future revenue (a $1 in 5 years isn't worth $1 today).
Knowing your LTV is what lets you outbid competitors on paid ads, justify higher-touch sales motions, and make marketing decisions based on math instead of vibes.
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