Today I Learned About Customer Lifetime Value (SaaS)

Customer Lifetime Value

Customer Lifetime Value (LTV) is a term used in SaaS that tells us how much a customer is worth. We use it to determine if acquiring a new customer pays off and to focus on long-term value.

Customer Lifetime Value (LTV, CLTV)

How much a customer will spend on your service overall.

Customer Acquisition Cost

Customer Acquisition Cost (CAC) tells us how much it costs us to get a new customer. We need a low CAC and a high LTV.

Customer Acquisition Cost (CAC)

Cost to acquire a customer.

Calculate LTV by dividing Average Revenue Per User (ARPU) with churn rate.

Average Revenue Per User (ARPU)

Monthly Recurring Revenue (MRR) divided by total users

Churn Rate

Rate of cancellations and missed renewals

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