LTV (Customer Lifetime Value)
Total revenue expected from a customer over their lifetime.
LTV estimates how much total revenue a customer will generate before they churn. The simple formula divides ARPU by monthly churn rate, giving you the expected lifetime in months. LTV is only useful in ratio to CAC (customer acquisition cost); a healthy LTV:CAC ratio is 3:1 or better.
Formula
LTV = ARPU / Monthly churn rate
Example
ARPU of $49 and monthly churn of 4% gives LTV = $49 / 0.04 = $1,225.