Customer Lifetime Value (CLV)
The total revenue a business can expect from a single customer account over the entire duration of their relationship.
Why it matters
CLV tells you how much you can afford to spend acquiring customers. When paired with CAC, it reveals whether your business model is sustainable and profitable.
Formula
Divide your ARPU by your monthly churn rate (as a decimal). For example, if ARPU is $100/mo and monthly churn is 5%, CLV = $100 / 0.05 = $2,000.
Calculator
What's a good CLV?
Healthy: CLV/CAC ratio of 3:1 or higher. Below 3:1 suggests you're overspending on acquisition.
Related metrics
CAC
SaaSThe total cost of acquiring a new customer, including all sales and marketing expenses.
LTV:CAC
SaaSThe ratio of Customer Lifetime Value to Customer Acquisition Cost, measuring the return on each dollar spent acquiring customers.
ARPU
SaaSThe average monthly revenue generated per active user or account.