LTV, or Lifetime Value, is a key metric for subscription businesses. It represents the total value that a customer will bring to your business over the course of their lifetime. This number is important because it helps you understand how much you can afford to spend to acquire new customers.
There are a few different ways to calculate LTV, but the most common method is to take the gross margin from all future payments and divide it by the customer churn rate. This gives you an estimate of how much revenue you can generate from each customer over the course of their subscription.
LTV is a critical metric for subscription businesses because it provides insight into acquisition costs and long-term profitability. By understanding your LTV, you can make informed decisions about where to allocate your marketing budget and how to price your product.
