Glossary / Customer Lifetime Value (LTV)
Customer Lifetime Value (LTV)
Customer lifetime value is everything one customer pays you across the whole relationship, not just the first sale. Multiply your average ticket by how many times a customer buys before they stop.
Work out yours
LTV = average ticket × purchases per year × years retained
$1,650
One customer is worth about $1,650 over the relationship.
Why it matters
LTV is what tells you how much you can afford to spend winning a customer. Businesses that only look at the first sale systematically underspend on acquisition and lose to competitors who understand what the second and third purchase are worth.
Where people get it wrong
Do not use revenue when you mean profit. If your margin is thirty percent, a customer worth 1,650 dollars in revenue is worth about 495 dollars to you. Spend against the second number.
If this number is not where you want it
LTV rises fastest when past customers come back on purpose instead of by chance. Automated recall is the cheapest lever on this whole page because those people already paid you once.
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See what it would take, free →About Follow-Up and Recall AutomationRelated terms
- LTV to CAC RatioThe LTV to CAC ratio compares what a customer is worth to what they cost to win.
- Repeat RateRepeat rate is the share of your customers in a period who had bought from you before.
- Average TicketAverage ticket is what a typical customer or job brings in before costs.
- Churn RateChurn rate is the share of customers who stop buying from you over a period.
Common questions
+ What is the difference between LTV and average ticket?
Average ticket is one transaction. LTV is every transaction that customer will ever make with you. A coffee shop has a tiny ticket and a large LTV.
Part of the small business glossary. All six free calculators are here.