What is LTV (Lifetime Value)?
Definition
The total revenue a business expects from a single customer account over the full duration of the relationship. A healthy SaaS business targets an LTV-to-CAC ratio of at least 3:1.
Related Terms
The average cost of converting a prospect into a paying customer, including marketing spend, sales salaries, and tooling. Lowering CAC while maintaining quality leads is a constant SaaS challenge.
The percentage of customers or revenue lost during a given period. High churn signals product-market fit issues, while negative net-revenue churn (expansion outpaces losses) is the gold standard for growth-stage SaaS.
The total predictable revenue a subscription business expects to earn over a 12-month period. ARR is a core health metric for SaaS companies because it smooths out monthly fluctuations and reveals long-term growth trends.