Your Customer Lifetime Value (LTV) is the estimated total revenue that, on average, a customer will give you throughout their entire term as a user and customer to your business. It is an important tool in giving you an idea of the total value that a new customer will be worth, so you can plan and project your revenues accordingly.

Basic LTV is calculated by taking your Average Revenue per Customer (ARPC) and dividing by your Revenue Churn Rate.

 

LTV = ARPC / (Revenue Churn (%))

 

A more precise LTV can be found through adding Gross Margin % to the ARPC calculation in order to deduct direct costs from the total calculation.

LTV = (ARPC × Gross Margin (%)) / (Revenue Churn (%))