Definition
The aggregate amount of money that your customers are likely to pay during their engagement with your company. Note: in some literature, the term CLV is used instead of LTV to indicate the aggregate Lifetime Value of your customers.
It is calculated by dividing your current recurring revenue by the estimated churn rate. If you use monthly recurring revenue, use the monthly churn rate. If you use annual recurring revenue, use annual recurring revenue. Example:
- You have €800’000 Annual Recurring Revenue
- Your average annual churn rate is 5%
- Your LTV is €800’000 / 5% = €16’000’000