LTV (Lifetime value)
LTV is the total a customer pays you over the time they stay: what they pay each month, multiplied by how long customers like them keep paying.
Worked example (made-up numbers)
Your customers pay $20 a month on average (your ARPA), and each month 5% of them cancel (your churn).
- The classic formula divides what they pay by the churn rate: $20 ÷ 0.05 = $400. It assumes customers keep behaving like this forever.
- A 12-month version only counts the next year. With 5% leaving each month, a customer pays for about 9.2 of the next 12 months on average, so about $184.
The two differ a lot, and early on the cautious one is the honest one.
Why it matters when you’re starting out
LTV is the other half of CAC. A channel where customers cost $100 is expensive if they’re worth $120 and cheap if they’re worth $600. Without LTV you can’t tell whether spending more on a channel is growth or a slow leak.
Early numbers are small and move fast. A few cancellations change your churn rate, and the classic formula swings with it; that’s why a 12-month horizon, or “revenue so far” beside it, is safer.
How to measure it
- Work out ARPA: the monthly revenue from your subscriptions divided by the number of paying customers.
- Work out monthly churn over a recent period: customers who cancelled divided by customers you had at the start, scaled to a month.
- Pick a horizon (12 months is sensible early on) and project what one customer pays over it.
- Keep the revenue customers have really paid so far next to the projection, so you can see when the projection is running ahead of reality.
In Nordva Launch
Launch works out ARPA and monthly churn from your Stripe account (read-only) and shows a 12-month LTV per currency, marked “low confidence” with fewer than five paying customers. The number is on every plan with Stripe connected; comparing it with what a channel cost (LTV:CAC) needs Indie.