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What Is LTV (Lifetime Value)?
LTV (Lifetime Value) is a SaaS metric that estimates the total revenue a business can expect from a single customer account over the entire duration of their relationship. LTV tells you how much a customer is worth, which determines how much you can afford to spend acquiring them.
How to Calculate LTV for SaaS
The simplest LTV formula for subscription businesses divides average revenue per account by the churn rate:
LTV = ARPA / Monthly Churn Rate
If your average account pays €200/month and your monthly churn rate is 2%, the LTV is €10,000. More sophisticated models factor in gross margin, expansion revenue, and discount rates, but the basic formula works for most planning purposes.
For annual contracts, divide ARR per account by the annual churn rate instead.
The LTV:CAC Ratio
LTV is most useful when compared to CAC (Customer Acquisition Cost). The LTV:CAC ratio tells you whether your unit economics work — whether each customer generates more revenue than they cost to acquire.
The commonly cited benchmark is a 3:1 LTV:CAC ratio — established by David Skok and widely cited by SaaS Capital and Bessemer Venture Partners. Below 1:1, you're losing money on every customer. Between 1:1 and 3:1, the business works but leaves little room for error. Above 5:1 might mean you're under-investing in growth and leaving market share on the table.
How Content Strategy Affects LTV
BOFU content tends to attract customers with higher LTV. Buyers who find you through comparison pages have already evaluated alternatives and chosen your product deliberately — they're less likely to churn than someone who signed up from a generic blog post without understanding what they were getting.
Product-led content also improves LTV by setting accurate expectations. Customers who see the product solving their specific use case before signing up activate faster and adopt more features, both of which correlate with longer retention.
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