Your Customers' Lifetime Value (LTV) is one of those metrics that keep your Finance Director up at night.
It’s the estimated revenue that a customer will generate during the entire span of their relationship with your company.
Precisely how it’s calculated depends upon your company’s business. A SaaS company will be different to a consulting firm or a widget manufacturer.
How to calculate your Customer Lifetime Value
Here is a quick back-of-the-envelope formula.
LTV = Average Value of a Sale x Average Number of Repeat Sales x Average Retention Time (Months or Years ) for a Typical Customer
Whatever formula your company uses, LTV provides a good indication of the maximum amount your company should invest in acquiring customers.
Click the image below to calculate your return on investment.