Customer lifetime value (LTV)

A customer is worth more than their first invoice. They renew, buy other services, sometimes refer others. Customer lifetime value adds up what they bring in from the first day to the last. It is written LTV (lifetime value) or CLV (customer lifetime value): two acronyms, one idea.

It leads to better decisions. If a customer brings in 20,000 euros over three years on average, spending 2,000 euros to acquire one is reasonable. If they bring in 1,500 euros, it is a loss.

It also lets you compare segments. Two targets can cost the same to acquire and have very different lifetime values. That is often the best argument for narrowing your prospecting.

For a subscription offer the simplest formula is: LTV = average monthly revenue per customer, times gross margin, times average relationship length in months. A customer paying 500 euros a month, at 80% margin, who stays 18 months on average is worth 7,200 euros of margin.

Average length is often derived from monthly churn: length is roughly 1 divided by churn. With 5% of customers leaving each month, the average length is around 20 months.

For a project business, replace monthly revenue with the average project value, times the average number of projects per customer. An agency whose clients order three 4,000 euro projects on average, at 50% margin, has an LTV of 6,000 euros.

LTV says what a customer brings in, CAC what they cost to win. The ratio between the two measures how profitable your growth is. In SaaS, a benchmark often quoted, popularized by investor David Skok, aims for an LTV at least three times the CAC.

A ratio that is too low means every customer loses you money, or close to it. A very high ratio is not always good news: it can mean you are investing too little in acquisition and leaving growth on the table.

Look at the payback period too: how many months of margin does it take to recover CAC? A high LTV recovered over three years weighs heavily on a small company's cash.

Using revenue instead of margin. A customer who pays 10,000 euros but costs 8,000 euros to serve is not worth 10,000 euros.

Extrapolating from too little history. A young company with six months of data does not yet know how long its customers stay. A cautious LTV revised every quarter beats an optimistic number that justifies overspending.

Using a single average. Small customers and large accounts have very different lifetime values. An LTV per segment is far more useful than an average that describes nobody.

Without history, start from cautious assumptions and write them down. How long is a customer likely to stay, given your offer? A one-off project does not renew like a monthly retainer. Take the low end of your range.

Ask your first customers how long they plan to work with you and what they would buy next. Their answers are not data, but they beat a guess made alone.

Then revise the estimate every quarter with real numbers: churn, renewals, add-on sales. After a year you have a reliable LTV, and you know how much you can really spend to win a customer.

LTV by segment is one of the best tools for writing your ideal customer profile. If consulting firms of 20 to 50 people stay three times longer than freelancers, that is where your prospecting should go, even if freelancers reply more often.

This matters on LinkedIn in particular. In MimikFlow's 2026 LinkedIn Prospecting Observatory (published in French), consultants and freelancers who were contacted replied 57.1% of the time, against 30.9% for directors and department heads. A high reply rate is pleasant, but the segment that replies most is not necessarily the one that pays most.

In MimikFlow you describe your target in your own words, and every prospect found is checked against that description before being invited. Each campaign has its own target, so you can put the effort on the segments with the best lifetime value and compare their results.