LTV (Customer Lifetime Value)
LTV is the total revenue or gross profit you expect from a customer over the whole time they stay, from first payment to cancellation.
Updated October 1, 2026
LTV (customer lifetime value) is the total revenue or gross profit you expect from a customer, from their first payment until they cancel. It tells you how much you can afford to spend to win a customer.
How to calculate LTV
The common shortcut divides average revenue per account by churn rate.
LTV = ARPA ÷ customer churn rate
If ARPA is $80/month and monthly churn is 4%, the average customer stays 1 ÷ 0.04 = 25 months. LTV is $80 × 25 = $2,000.
To measure profit instead of revenue, multiply by your gross margin. At an 80% margin, the same customer's gross-profit LTV is $1,600.
Some cautions:
- Match the periods. Use monthly ARPA with monthly churn.
- The formula assumes churn stays steady. For a young company with uneven retention, the result is rough.
- Revenue LTV is always higher than gross-profit LTV. Pick one and stick with it.
Why LTV matters
LTV caps what you should spend to acquire a customer. You usually read it against CAC as the LTV:CAC ratio. Lower churn makes customers stay longer, and expansion raises what they pay, so both increase LTV.