LTV

LTV (Lifetime Value) estimates the total revenue a customer is worth over their relationship with you, most accurately calculated as (average revenue per user × gross margin) ÷ monthly churn rate. The LTV:CAC ratio — how many dollars you get back per dollar spent acquiring a customer — is the single most important unit-economics benchmark; above 3:1 is the standard bar for sustainable SaaS.

• —An LTV:CAC ratio below 1 means you lose money on every customer, regardless of how fast you grow.
• —Payback period (CAC ÷ monthly gross profit per customer) tells you the timing LTV:CAC alone doesn't — how long until you've broken even.
• —Reducing churn raises LTV directly, since average customer lifespan is the inverse of monthly churn rate.

This is the exact lesson that covers this term in depth — with examples, diagrams, and a hands-on exercise.