Definition
Lifetime value (LTV, or customer lifetime value, CLV) estimates how much a customer is worth over their whole relationship with a business. It tells you how much you can afford to spend to win a customer.
Formula
For a subscription with steady churn: LTV = average revenue per customer per month × gross margin ÷ monthly churn rate.
Example
$50 a month at 80% margin with 4% monthly churn: 50 × 0.8 ÷ 0.04 = $1,000.
Try it in the customer lifetime value calculator, and read more in customer lifetime value explained.