LTV (lifetime value)
The total gross profit you expect from one customer over the whole relationship.
Last reviewed 12 September 2026
Use gross profit, not revenue. LTV built on revenue flatters every business with thin margins.
Keep the assumptions conservative. An optimistic churn rate can inflate LTV by several times.
Formula
LTV = Average revenue per customer × Gross margin % ÷ Churn rate
Frequently asked
What is ltv (lifetime value)?+
The total gross profit you expect from one customer over the whole relationship. Use gross profit, not revenue. LTV built on revenue flatters every business with thin margins. Keep the assumptions conservative. An optimistic churn rate can inflate LTV by several times.
How do you calculate ltv (lifetime value)?+
LTV = Average revenue per customer × Gross margin % ÷ Churn rate
Why does ltv (lifetime value) matter for founders?+
Keep the assumptions conservative. An optimistic churn rate can inflate LTV by several times.
Related terms
CAC (customer acquisition cost)
What it costs, on average, to win one new customer.
Churn rate
The share of customers or revenue lost in a period.
Unit economics
Revenue and cost measured per single unit — one customer, one order, one project.
CAC payback period
How many months of gross profit it takes to recover the cost of winning a customer.
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