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lifetime value (LVT)

In the context of Software as a Service (SaaS), Lifetime Value (LTV) represents the total projected revenue a company expects to generate from a single customer throughout their entire relationship, factoring in recurring subscription fees, upgrades, and expansion revenue before the customer eventually churns. Because SaaS business models rely on long-term retention rather than one-time transactions, LTV is typically calculated by multiplying the Average Revenue Per Account (ARPA) by the average customer lifespan (or dividing ARPA by the churn rate). This metric is the cornerstone of SaaS unit economics because it dictates the sustainable limit for Customer Acquisition Cost (CAC); essentially, for a SaaS business to remain profitable, the value derived from a customer over time must significantly exceed the cost required to acquire and support them.