LTV (customer lifetime value)
LTV (lifetime value) is the total money or profit a client brings to a company over the entire relationship.
In plain words
The first purchase is not the client’s full value. If they come back, buy more and recommend you, their real value is larger than the first receipt. LTV tries to estimate that full amount.
How it is calculated
A simple formula: LTV = average order value x number of purchases over the client’s lifetime x margin.
A hypothetical example: the average order is 100 units, a client buys 6 times on average, the margin is 30%. LTV = 100 x 6 x 0.3 = 180 units of profit.
For loans, subscriptions and services it is calculated differently: the sum of payments over the whole term minus servicing costs and losses.
Why it matters to an owner
LTV determines how much you can pay to acquire a client. If LTV is 180 and acquisition costs 200, every new client is a loss, even if the first deal looks profitable. If LTV is 180 and acquisition costs 60, you can safely scale traffic.
LTV grows not from advertising but from working with the client after the first purchase: reminders, repeat offers, answers to questions, solving problems. In other words, largely from conversations.
Common mistakes
- Calculating LTV on revenue rather than profit.
- Taking an average across the whole base: clients from different channels behave differently, and the average hides the best and worst sources.
- Treating a forecast LTV as a guarantee. It is an estimate and should be checked against actual results every few months.
More in Signals
- Objection handling in chat: why “too expensive” and “I’ll think about it” need a different cure in writingAn objection in chat isn’t a “no” — it’s an unfinished question: expensive compared to what, think about what, don’t trust why. In writing you can’t carry it with tone or improvise like on a call, but the customer can leave in silence. So what works isn’t arguing or a script, but a short understanding question that reopens the conversation, and speed while the customer is still there.
- Sales team motivation: what to pay for when sales happen in chatSales motivation works when the variable pay is tied to money actually paid, not to activity: message counts and time online are easy to inflate. You need a clear formula, a fair way of assigning clients and every rep seeing their own results. Non-cash motivation in chat means recognizing specific conversations, not saying generic words.