Glossary · Business

Customer Lifetime Value

The total revenue a business can expect from a single customer account over the entire duration of their relationship.

Customer Lifetime Value (CLV or LTV) is a prediction of the total revenue a business will earn from a customer over the entire span of their relationship. CLV is calculated using various methods: historical CLV (sum of past revenue from a customer), predictive CLV (using statistical models to forecast future revenue), and simplified CLV (average revenue per customer × average customer lifespan). A common formula is CLV = (Average Revenue Per User × Gross Margin) / Churn Rate. CLV is essential for determining how much to spend on customer acquisition (CAC), which customer segments are most valuable, and where to focus retention efforts. A healthy business typically has a CLV:CAC ratio of 3:1 or higher.

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