What is LTV?

LTV stands for Lifetime Value, sometimes called customer lifetime value. It is a measure of how much money an average customer is worth to you over the entire time you do business together — from first purchase until they stop. Instead of looking only at what a customer pays once, LTV looks at the whole relationship over time.

Think of a regular at your local café. A coffee might cost £3, but if they come three times a week for several years, that customer is worth thousands in total. That is the sum LTV tries to capture: not the single purchase, but the whole relationship. A customer who stays long and buys often has high LTV.

LTV becomes truly useful alongside another figure: CAC, what it costs to acquire the customer. If a customer is worth much more than they cost to win, you make money. If it is the other way around, you lose money on every new customer.

Why is LTV important for your business?

LTV helps you understand how much you can afford to spend on marketing and acquiring new customers. If you know a customer is worth a lot over time, you can afford to invest more in attracting new ones — and still profit. Without that figure, you are guessing blind.

A common rule of thumb is that LTV should be at least three times CAC. If a customer is worth less than they cost to win, you lose money on growth, however good it looks on the surface.

LTV in practice

Say you run a subscription service where customers pay £30 a month on average and stay for two years. Each customer is then worth around £720 in revenue over time — that is their LTV. Now you know how much you can realistically spend on ads to win a new customer and still make money.

If you then get customers to stay longer or buy add-on services, LTV rises — and suddenly you can afford to grow faster. Many businesses focus heavily on chasing new customers, but raising LTV among those you already have is often both cheaper and more profitable.