LTV (Customer Lifetime Value)

LTV (Customer Lifetime Value)

The total gross-margin revenue you expect from an average customer across their full relationship with your product.

What LTV (Customer Lifetime Value) means

LTV estimates how much a customer is worth to you. The standard SaaS formula is ARPU × gross margin ÷ churn rate. So a $100/month customer at 80% gross margin with 2% monthly churn has an LTV of roughly $4,000.

Early-stage LTV numbers are noisy — you don't have enough tenure data to know real churn. Investors know this and discount early LTV claims accordingly. What they want is the LTV:CAC ratio (target 3× or better at maturity) and honest disclosure of the assumptions behind your churn number.

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