LTV (Customer Lifetime Value)
The total gross profit expected from a customer over their lifetime.
LTV is average revenue per user multiplied by gross margin, divided by monthly churn rate. The gross margin step matters — LTV on revenue rather than margin overstates the number substantially.
It requires enough history to be credible. Calculating lifetime value from three months of data means extrapolating a lifetime from almost nothing, and investors treat such figures sceptically.
LTV is used almost entirely as a ratio against CAC. On its own it is an estimate; against acquisition cost it describes whether the business model works.