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Overview

Lifetime Value (LTV) measures how much a customer will pay for our service over time.”

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What is Lifetime Vlaye?

Lifetime Value (LTV) measures how much a customer will pay for our service over time. You can calculate how much revenue a typical customer will generate with LTV.

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How to Calculate LTV

To calculate LTV, multiply your average annual profit per customer by the average lifetime of a customer.

LTV Formula

LTV = Average Annual Profit Per Customer * Averate Lifetime of a Customer
What is Customer Acquisition Cost (CAC)?

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Why CAC and LTV are important?

You can check the profitability of your product by considering the LTV:CAC ratio. It is ideal when the LTV is greater than the CAC, which means that the revenue you generate from a customer is greater than the cost of acquiring the customer. Therefore, you can still profit with a higher LTV even with a high CAC. On the other hand, if you have a low LTV, you might have low profitability even with a low CAC.
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