Lifetime Value (LTV)
The total revenue a customer generates over their entire relationship with your business.
Definition
LTV (also called CLV or CLTV) estimates the total revenue from a customer over their lifetime. For subscription businesses: LTV = ARPU × average customer lifespan. More advanced models account for gross margin and discount rates. LTV is the counterpart to CAC - together they determine unit economics viability.
Why it matters for founders
LTV tells you how much you can afford to spend on acquisition. If your LTV is $1,000, spending $200 to acquire a customer makes sense. If LTV is $100, that same $200 CAC kills your business.
Example
A SaaS tool charges $99/month. Average customer churns after 14 months. LTV = $99 × 14 = $1,386. With a CAC of $400, the LTV:CAC ratio is 3.5:1 - healthy.
How Foundra helps
Foundra's Pricing & Packaging card helps you model pricing tiers that maximize LTV, and the Validation Hypotheses card tests whether customers will actually pay your target price.
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Related terms
Customer Acquisition Cost (CAC)
The total cost to acquire one new customer.
Churn Rate
The percentage of customers who stop using your product in a given period.
Monthly Recurring Revenue (MRR)
The predictable revenue your business generates every month from subscriptions.
Unit Economics
The revenue and costs associated with a single unit of your business (usually one customer).