Analytics
What is Customer Lifetime Value?
Also called: CLV, LTV
Customer lifetime value is the total profit a typical customer brings over the whole relationship. It tells you how much you can afford to spend to win one.
Customer lifetime value is an estimate of how much a customer is worth to your business across everything they buy from you. That includes repeat jobs, renewals, referrals and add-ons, not just the first sale.
It changes how you judge marketing. A customer who buys once for a modest amount may look unprofitable if you only count the first sale. A customer who stays for years and refers others may justify a much higher acquisition cost. Knowing the number helps you decide how aggressively to advertise.
To estimate it, look at your average sale, how often customers return and how long they stay. Be honest about uncertainty, since early numbers are rough. Software that tracks customers over time, like a CRM, makes the figure far more reliable.
Example
A lawn care company sees that a typical customer stays for several seasons, so one season's invoice understates what the customer is worth.
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