LTV (Lifetime Value)

Customer LTV: Lifetime Value

LTV (Lifetime Value) has two common formulas. For SaaS you write it as ARPU · margin · (1 / churn); for e-commerce, AOV · annual frequency · years. Take a SaaS account with ARPU of R$ 100/month, an 80% margin and 5% monthly churn, and you land on LTV = R$ 1,600. What the number tells you is roughly how much profit one customer brings in over the whole span of the relationship.

Applications and benchmarks

LTV shows up across unit economics work: it anchors retention discussions, sets the ceiling for what you can spend on CAC, and helps you rank ICP segments so the high-LTV ones get priority. A LTV/CAC ratio above 3 is the healthy mark. Above 5 looks great on paper, though it can be a sign you're not putting enough money into growth. The usual levers for pushing LTV up are cutting churn, running upsell and cross-sell, and nudging the average ticket higher.

FAQ

Should I use gross or contribution margin? For SaaS, contribution margin gives you a tighter number, since it already nets out variable costs and support. Gross margin is looser.

Why does churn weigh so much? Because 1/churn is what gives you the average customer lifetime in months. Drop churn from 5% to 3% and that lifetime jumps from 20 months to 33.

Does LTV work for e-commerce? It does. Use AOV · annual purchase frequency · expected retention years, and lean on cohorts to sharpen the estimate.