What is Lifetime Value (LTV)?
Lifetime value is the total revenue a business expects to earn from a single customer over the entire duration of their relationship. For a subscription business, a simple version is the average monthly revenue per customer divided by the monthly churn rate.
LTV captures the long-term worth of a customer, not just the first sale. A customer who pays $30 a month and stays for two years is worth $720 — far more than the first month's revenue suggests. That full value is what justifies acquisition spend.
LTV rises when you increase pricing, reduce churn, or expand revenue per customer through upsells. Each of those levers directly improves how much you can afford to spend acquiring the next customer.
Why it matters
LTV is the ceiling on what you can profitably spend to acquire a customer. Without it, you are guessing whether your marketing is sustainable.
Improving LTV — usually by reducing churn — is often the highest-leverage growth move available, because it makes every acquisition channel more profitable at once without changing the channels themselves.
How Distro helps
Distro focuses your effort on channels that attract higher-quality, longer-retaining customers, lifting LTV rather than chasing cheap signups that churn. See which channels fit your business in your free growth report.
Related terms
Customer Acquisition Cost (CAC)
Customer acquisition cost is the total cost of sales and marketing efforts divided by the number of new customers acquired in a given period.
Churn Rate
Churn rate is the percentage of customers who cancel their subscription or stop using a product within a given time period.
Monthly Recurring Revenue (MRR)
Monthly recurring revenue is the predictable total revenue a subscription business earns each month from all active subscribers.