Customer Lifetime Value (cLTV)

Customer Lifetime Value is the total profit you expect to generate from a single customer account over the entire relationship. It is not a revenue number, even though it is often reported as one. Used properly, cLTV tells you how much you can afford to spend to acquire a customer and still expect a healthy return.

Because it is a projection, cLTV is only as good as its inputs — a small change in assumed lifetime or margin swings it wildly. Treat it as a decision tool for how much to spend on acquisition, not a precise forecast of any one account's worth.

The simplest formula is average revenue per account multiplied by gross margin multiplied by average customer lifetime in months. A faster shorthand divides average recurring revenue per account by monthly logo churn, but only if your churn is stable and your customer base is reasonably homogeneous.

Whichever formula you use, guard the churn input: dividing by a low or unstable churn rate produces an enormous, flattering lifetime that rarely survives contact with reality. Recompute it by cohort and segment, since a blended cLTV hides the very differences that make the number actionable.

Your assumptions will materially change the number you report.

• Do you use revenue or gross-margin contribution?
• Do you include expansion revenue and professional services fees?
• Do you calculate by cohort, segment, or across the whole base?