Glossary
LTV
Meaning and details
LTV, identical in practice to CLV, is the full worth of a customer: what they pay you from first invoice to churn, ideally measured as gross profit rather than revenue. Simple estimate: average revenue per account times...
LTV meaning
Lifetime value: the total profit a customer contributes across the whole relationship, the ceiling on acquisition spend.
What is LTV?
LTV, identical in practice to CLV, is the full worth of a customer: what they pay you from first invoice to churn, ideally measured as gross profit rather than revenue. Simple estimate: average revenue per account times average tenure. A $29 plan held for 14 months is roughly $406 gross, and if infrastructure and support eat a fifth of it, the honest LTV is about $325. That figure is the ceiling the business must not exceed to acquire a customer, and the target retention work keeps raising.
Why it matters to an indie builder: LTV is one half of the only equation that matters in unit economics, LTV against CAC. Above 3 to 1, growth spending pays for itself; below 1, every customer you buy burns money. Because LTV responds to retention and expansion, it is also the number that converts soft work, onboarding, support quality, annual plans, into a defensible acquisition budget.
A concrete example: a $19/month tool with 4 percent monthly churn: expected tenure 25 months, LTV about $475. The team moves annual billing forward with two months free: 40 percent of new customers take it, and annual payers churn at half the rate. Blended tenure stretches to 33 months, LTV rises to roughly $630, and the ad budget that was marginal at $80 per acquisition now returns sevenfold. Nothing new was built; the same users became worth a third more, and the growth engine unlocked.
Common mistakes: revenue LTV where margin matters (on infrastructure-heavy products the gap is the business), computing LTV from early cohorts whose churn is unrepresentatively high or low, then defending the number for a year, using LTV to justify spend before retention stabilizes, the classic premature-scaling trap, and maximizing LTV with dark patterns, hard cancellation, surprise renewals, which raise the number right up until reviews and chargebacks tax it back down. See clv, cac and churn for the sibling entries; the analytics blocks on IndieBoot compute the cohort tables these numbers come from.
How is LTV calculated?
LTV = Average Purchase Value * Average Purchase Frequency * Average Customer Lifespan