Revenue & Sales

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Customer Lifetime Value

Lifetime value estimates the gross profit a customer generates over their lifetime, using margin and churn.

Formula

CLV = \dfrac{ARPU \times m}{c}

Variables

CLVCustomer lifetime value

ARPUAvg revenue per user / period

mGross margin (fraction)

cChurn rate (fraction)

Example

ARPU $30, margin 0.8, churn 0.05: CLV = 30×0.8/0.05 = $480

Did You Know?

A healthy business keeps its LTV-to-acquisition-cost ratio above 3:1 — each customer earns back far more than they cost to win.

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More in Revenue & Sales

Total Revenue

Total revenue is the selling price multiplied by the number of units sold.

Net Revenue

Net revenue is gross revenue less returns, refunds and discounts — the amount actually recognised.

Average Revenue

Average revenue is total revenue divided by units sold — equal to price per unit in a single-price market.

Marginal Revenue

Marginal revenue is the extra revenue earned from selling one additional unit.

Revenue Growth Rate

The percentage change in revenue from one period to the next.

Monthly Recurring Revenue

Monthly recurring revenue is the number of active subscribers times average revenue per user per month.