Unit economicsMetric 12 of 35

LTVCustomer Lifetime Value

Total gross profit you'll earn from an average customer.

The expected gross profit from a customer over their entire relationship. Disclose your margin assumption — LTV calculated on revenue (ignoring COGS) overstates economic value, sometimes 2–3×.

Formula

LTV = ARPU × Gross Margin ÷ Customer Churn Rate

Worked example

ARPU $200, gross margin 80%, monthly churn 2% → LTV = 200 × 0.80 ÷ 0.02 = $8,000.

Benchmark

LTV : CAC target

Excellent

5:1+

Healthy

3:1

Underwater

< 1:1

Why it matters

LTV defines how much you can afford to spend acquiring a customer. Without LTV you're flying blind on CAC. The formula also exposes which lever to pull: raise ARPU (pricing), reduce churn (retention), or improve margin (efficiency). All three compound.

Common mistakes

Using revenue instead of gross profit — overstates LTV by your COGS percentage.
Using current churn for new cohorts that may behave very differently.
Ignoring discount rate on multi-year LTV (less critical for SMB SaaS, big deal for enterprise).

Tracked in FlowMRR

Not a single card: FlowMRR feeds the ARPU (Dashboard) and churn rate (Retention) this formula needs — add your own margin assumption to complete it.

Track LTV in FlowMRR