Customer Lifetime Value (LTV): Definition, Meaning & Guide for Indian Businesses

LTV is the total revenue you expect from a single customer across their entire relationship with you. LTV = ARPU × gross margin × average customer lifespan in months.

What is Customer Lifetime Value (LTV)?

Lifetime Value is the cumulative revenue you will earn from one customer before they churn. The simplest formula: LTV = (monthly revenue per customer × gross margin %) ÷ monthly churn %. For example, if a customer pays ₹2,000/month at 80% gross margin and your monthly churn is 3%, LTV = (2,000 × 0.8) ÷ 0.03 = ₹53,333. Compare LTV to CAC: the ratio LTV/CAC must be at least 3 for the business to be healthy. LTV is where most SaaS economics live or die — small improvements in churn or expansion revenue compound dramatically over a customer's lifetime.