Definition
Customer lifetime value is the profit you expect from one customer over the whole relationship — not the first invoice. It is the ceiling for what you can spend to acquire that customer and still have a business.
In the room
How the word shows up in a real conversation.
A SaaS plan is ₹2,000 a month. Customers stay 10 months and gross margin is 80%. Simple LTV is ₹16,000. If CAC is ₹18,000, the unit does not work yet.
Formula
LTV ≈ ARPU × gross margin × average lifetime
Common mistake
Using revenue instead of profit, or assuming customers stay forever. That inflates LTV until the raise, then the model breaks.
See also
Customer Acquisition Cost (CAC)
What you spend in sales and marketing to win one new paying customer.
Read definition →
Churn rate
Percentage of customers who stop using a service over a given period.
Read definition →
Payback period
Time required for an investment to recover its initial cost through cash flows.
Read definition →
Unit Economics
Financial analysis of the profitability of individual units or transactions.
Read definition →
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