LTV (Customer Lifetime Value)
The gross profit a customer is expected to bring in over the whole relationship, often estimated as ARPA × gross margin ÷ churn rate. Compared with CAC, it shows how much winning a customer may cost. Young companies with little churn history get absurdly high values from this formula, so cap the assumed lifetime at a few years.
More terms from Metrics & KPIs
- CAC (Customer Acquisition Cost)
- ARR (Annual Recurring Revenue)
- MRR (Monthly Recurring Revenue)
- ACV (Annual Contract Value)
- NRR (Net Revenue Retention)
- Churn Rate
- Conversion Rate
- CPL (Cost per Lead)
- ROI (Return on Investment)
- GRR (Gross Revenue Retention)
- Expansion Revenue
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