What is Lifetime value (LTV)?
Lifetime value (LTV) is the total gross profit you expect to earn from an average customer over the whole time they stay with you.
Formula
LTV = average monthly revenue per customer × gross margin ÷ monthly churn rate
Example
Customers pay $100 a month, your gross margin is 80%, and 4% of customers cancel each month. LTV = $100 × 0.8 ÷ 0.04 = $2,000.
Why it matters for early-stage founders
LTV sets how much you can afford to spend to win a customer. A common benchmark is an LTV at least three times your CAC.
The common mistake
Using revenue instead of gross profit, or calculating it from a few months of data. Early LTV estimates are often far too optimistic.
Check your unit economics
solvee helps you see whether each customer adds value to the business.
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Reviewed October 12, 2026