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GLOSSARY

What is customer lifetime value? (LTV or CLV)

DEFINITION

Customer lifetime value (LTV) is what an average customer is worth over the whole relationship. A simple version is monthly gross margin per customer multiplied by the average months they stay.

Compare it with customer acquisition cost. For subscription software, David Skok’s guideline is an LTV to CAC ratio above 3, with exceptions. Other business models need their own benchmark.

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