SaaS metrics
Lifetime value (LTV)
Also called LTV, Customer lifetime value, CLV.
Lifetime value (LTV) is the total money you expect one customer to bring in before they leave.
A simple SaaS version: average MRR per customer divided by your monthly churn rate. $50 a month with 5% monthly churn gives an LTV of $1,000. For a store, it is the average order value times how many orders a customer places.
With a handful of customers, LTV is a guess, so use it as a range. Its main use is to set a limit on customer acquisition cost: you cannot spend more to win a customer than they bring in. The payback period matters too. Grow LTV by increasing repeat purchases or cutting churn.
Go deeper
- How to calculate CAC and payback periodCalculate CAC and payback period with a few customers and almost no ad spend: one sheet of dollars and hours by channel, a 5-minute daily log, and a Sunday rule for where your money and hours go next.
- How to increase repeat purchasesD2CIncrease repeat purchases on a new store: list every buyer with the day their order runs out, put a one-tap reorder link on a refill card in every parcel, write to each buyer 7 days after delivery and 7 days before they run out with no discount, add subscriptions only once 5 people reorder, and fix the top reason every Sunday.
- How to reduce SaaS churnSaaSReduce SaaS churn when you have only a handful of customers: turn on failed-payment retries, card emails and cancellation reasons in your billing tool today, ask everyone who cancels why within 24 hours, message every customer who goes quiet for 7 days, offer a yearly plan in month 2 or 3, and fix the top reason people leave every Sunday.
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