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What does it mean?

Lifetime value

A prediction of the net profit attributed to the entire future relationship with a customer. To calculate LTV, follow these steps for a given time period:

  1. Take the revenue the customer paid you in that time period.
  2. Subtract from that number the gross margin.
  3. Divide by the estimated churn rate (aka cancellation rate) for that customer.

For example, if a customer pays you $100,000 per year where your gross margin on the revenue is 70%, and that customer type is predicted to cancel at 16% per year, then the customer's LTV is $437,500.