Revenue Metrics

Customer Lifetime Value (LTV)

The total net revenue a business expects to earn from a customer over their entire relationship.

LTV answers the question: how much is a customer ultimately worth? It depends on three things — how much the customer pays per period, how long they stay, and how much margin the business keeps after serving them. A high LTV justifies spending more to acquire customers and investing heavily in retention programs. The most common mistake is computing LTV without including gross margin, which inflates the number and makes unit economics look better than they are. LTV also changes as a business matures — expansion revenue from upsells and cross-sells can dramatically increase LTV even when the initial contract value stays flat, which is why net revenue retention is so closely connected to LTV growth.