one-line definition
LTV is a core operating metric that helps small teams make better product and growth decisions.
formula: LTV = Average revenue per customer ÷ Churn rate
tl;dr
LTV tells you how much revenue one customer generates before they churn. Compare it to CAC -- if LTV is not at least 3x CAC, your unit economics are broken.
Simple definition
LTV (Lifetime Value) is the total revenue you expect from a single customer over the entire time they stay subscribed. It connects two things: how much a customer pays you each month and how long they stick around. A high LTV means customers are either paying more, staying longer, or both.
For solo founders, LTV is the ceiling on what you can spend to acquire a customer. If your LTV is $300, spending $200 on ads per customer means you only have $100 left for everything else -- hosting, support, your salary. That math matters fast.
How to calculate it
LTV = Average revenue per customer per month / Monthly churn rate
Say your average customer pays $39/month and your monthly churn rate is 5% (0.05):
LTV = $39 / 0.05 = $780
That means a typical customer generates $780 in total revenue before leaving. If your churn drops to 3%, LTV jumps to $1,300. Small improvements in retention have an outsized effect on LTV.
Example
You run a $29/month email tool. Your churn is 8% monthly. LTV = $29 / 0.08 = $362.50. You're spending $120 on Google Ads per signup, so your LTV:CAC ratio is about 3:1 -- right at the threshold. You ship a better onboarding flow that drops churn to 6%. Now LTV = $29 / 0.06 = $483. Same acquisition cost, but each customer is worth $120 more. That extra margin lets you reinvest in content marketing or hire a part-time support person.
Related reading
Related terms
- MRR
- CAC
- LTV
FAQ
Why does LTV matter?+
It gives a fast signal about whether your product and distribution system is improving or regressing.