Lifetime Value (LTV)

Lifetime Value estimates the gross profit expected from a customer over the course of the customer relationship.

LTV can be estimated using customer revenue, gross margin, and retention. The calculation assumes that current customer economics and retention behavior are representative of future periods.

Higher LTV indicates greater expected economic value per customer and can result from higher customer revenue, stronger gross margins, better retention, or a combination of these factors.

Because LTV is an estimate, it is sensitive to its underlying assumptions, particularly retention. It should be evaluated alongside observed customer behavior and CAC rather than treated as a realized value.

MetricFrame calculates LTV as ACV × Gross Margin ÷ (1 − GRR). It also calculates Cohort Observed LTV as cumulative gross profit per customer to date for each cohort vintage.