LTV (Customer Lifetime Value)
LTV (Customer Lifetime Value): The total revenue (or profit) expected from a customer over their lifetime. Also known as CLV (Customer Lifetime Value) or CLTV.
Also known as: LTV, CLV, CLTV
Formula
LTV = (ARPA × Gross Margin) / Revenue Churn RateLTV-O = (ARPA × Contribution Margin) / Revenue Churn RateLTV-M = (ARPA × Gross Margin) / Revenue Churn RateLTV-M − LTV-O = Variable Service Costs per Customer × Customer LifetimeWhat It Tells You
The upper bound of what you should spend to acquire a customer.
Dual-Lens: Operating / Market Forms
This metric has two governed forms derived from the same Commercial Event Ledger using Attribution Taxonomy Layer tags.
Operating Form: Contribution LTV (LTV-O)
LTV-O uses contribution margin — revenue minus all variable costs including implementation, onboarding, support, and customer success. It reflects the true profit contribution over a customer's lifetime.
- CEL Source:
- `Revenue_Event`, `Cost_Event`
- ATL Inclusion:
- All variable `cost_function` values per customer
LTV-O = (ARPA × Contribution Margin) / Revenue Churn RateWhat it tells you: The realistic lifetime profit from a customer after all variable delivery costs. The number to use for pricing and unit economics decisions.
Market Form: Gross Margin LTV (LTV-M)
LTV-M uses SaaS gross margin — revenue minus COGS only. This is the formula already defined above and matches investor benchmarks (the 3:1 LTV:CAC threshold uses this form).
- CEL Source:
- `Revenue_Event`, `Cost_Event`
- ATL Inclusion:
- `cost_function` = `Infrastructure` only (COGS)
LTV-M = (ARPA × Gross Margin) / Revenue Churn RateWhat it tells you: The investor-comparable lifetime value. The number used in LTV:CAC ratios reported to the board and in fundraising materials.
Bridge
LTV-M − LTV-O = Variable Service Costs per Customer × Customer LifetimeThe delta (LTV-M − LTV-O) is the **Contribution Leakage** — the lifetime profit that gets consumed by variable service costs. Large leakage means the business model depends on services that erode unit economics, signalling opportunities for services productisation and self-serve onboarding. The canonical LTV formula in investor contexts uses gross margin (LTV-M) — this is what a16z, Bessemer, and SaaS Capital reference. Contribution margin LTV (LTV-O) is recommended by growth equity investors for deeper unit economics analysis. ---
Related Metrics
Connected in the GASP relationship graph.
Upstream — what drives this
- Churn Rate reduces LTV (Core)
Downstream — what this drives
- LTV outcome of Expansion MRR (Core)
Sources
GASP Standard v1 · Last updated