Customer Lifetime Value is basically the amount of money you will gain from a given customer during his whole account. It’s a critical metric to track, because compared with Customer Acquisition Cost (CAC) it’s an indicator if a given customer is profitable for your business. E.g.: if you spend 500$ to acquire a customer that has LTV of 300$, it makes no sense.
Calculating LTV is very simple: if a customer pays you 1000$/month and has a 12-month contract, his LTV will be 12.000$.
