LTV

Lifetime value = monthly value × how long they stay.

LTV tells you how much a customer is worth, and so how much you can afford to spend to get one. It’s the other half of the CAC conversation.

The move

Average lifetime (months) = 1 ÷ monthly churn. 5% churn → 1 ÷ 0.05 = 20 months. Then LTV = monthly revenue per account × lifetime. For the version that counts, multiply by gross margin too.

Worked example

$100/mo, 4% monthly churn, 80% gross margin

  1. Lifetime: 1 ÷ 0.04 = 25 months
  2. Revenue LTV: $100 × 25 = $2,500
  3. Margin LTV: $2,500 × 80% = $2,000
  • 1 ÷ churn: 1% → 100 months, 2% → 50, 2.5% → 40, 4% → 25, 5% → 20, 10% → 10.
  • Cutting churn from 4% to 2% doubles LTV. Retention is a growth lever.