LTV

What is LTV?

LTV — Lifetime Value — measures the total economic value a customer generates over their entire relationship with your business. It includes all purchases, not just the first one. LTV is critical for understanding whether your acquisition strategy is profitable in the long run.

What it means in practice

In practice, LTV lets you make smarter decisions about what you can afford to pay for a customer. If a customer's LTV is $500, you can invest significantly more in acquisition than if you only look at the first purchase. The LTV calculation varies by business model — SaaS calculates differently than e-commerce. But the principle is the same: understand the long-term value, not just the initial transaction. I've seen companies completely change their growth strategy once they got LTV right.

Why it matters

LTV changes the entire equation for customer acquisition. It connects marketing, retention, and product development. Without LTV, you're making budget decisions based on incomplete information. With LTV, you can scale deliberately — and know when you can afford to pay more for better customers.

Common mistakes

• Calculating LTV without accounting for churn and time horizon
• Using a single average without segmenting by customer type or channel
• Setting CAC targets without having a reliable LTV calculation