LTV (Lifetime Value)
The total revenue a customer generates on average over the full duration of their relationship with the company. It is calculated by dividing average revenue per period by the churn rate for that same period, or by projecting historical cohort data.
In practice
The LTV-to-CAC ratio above 3 is the standard benchmark for unit economics health in subscription businesses. Below 2, acquisition costs too much relative to what each customer returns. For a SaaS billing 200 euros per month with 2% monthly churn, the theoretical LTV is 200 / 0.02 = 10,000 euros. With a CAC of 2,000 euros, the ratio reaches 5 — a sign of viable economics. LTV always depends on future churn, which remains uncertain.