Customer Lifetime Value (LTV)

Summary

The total revenue (or profit) expected from a customer over their entire relationship with the business — paired with CAC, it tells you whether your growth is actually sustainable.

• 1Calculate a rough LTV for a hypothetical subscription product using average order value and retention.
• 2Learn the commonly cited healthy benchmark (LTV:CAC around 3:1) and why it's a rule of thumb, not law.
• 3Understand why a growing customer base can still mean a dying business if this ratio is broken.