What is LTV?
Lifetime Value
Lifetime Value (LTV) is the total revenue a customer generates over their entire relationship with your business. It is the ceiling on what you can afford to pay to acquire them.
LTV = Average order value × Purchase frequency × Customer lifespanDTC: $120-$600 typical · SaaS SMB: $2K-$10K · SaaS Enterprise: $50K-$500K+
- LTV
- Lifetime Value (LTV) is the total revenue a customer generates over their entire relationship with your business.
Why LTV matters
LTV tells you the total revenue potential of one customer. Combined with CAC, it reveals whether your acquisition is profitable. For ecommerce, 90-day LTV is the most actionable window. For SaaS, 3-year LTV is standard.
Worked example
Plug a real number into the formula to see LTV in action:
Numbers are illustrative. Try our Customer LTV Calculator for your real numbers.
Common mistakes with LTV
- 1
Looking at single-channel ROAS in isolation instead of blended MER. Last-click attribution overweights bottom-funnel channels and starves top-of-funnel.
- 2
Setting a uniform target across products with different margins. A 2× ROAS is profitable on 80% margin and unprofitable on 20%.
- 3
Optimizing CAC without measuring LTV. Cheap customers with bad retention destroy unit economics.
How to improve LTV
Run incrementality tests every quarter to validate which channels actually drive new revenue vs steal credit.
Build a unit economics dashboard separating CAC, LTV, contribution margin, and payback by channel and cohort.
Establish a contribution margin floor for each channel — pause spend when margin drops below threshold for 14 days.
Common questions about LTV
What is LTV?▾
How is LTV calculated?▾
What is a good LTV benchmark?▾
Why does LTV matter for marketing teams?▾
Related terms
Need help applying LTV to your business?
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