What is LTV?
LTV is a core concept in modern B2B revenue. Here is a clear, accurate definition, why it matters, and how Ardovo handles it.
Short answer
LTV, or customer lifetime value, is the total recurring revenue or gross profit a business expects to earn from a customer across the entire relationship. It is estimated from average revenue, gross margin, and expected lifetime. LTV sets the ceiling on what you can profitably spend to acquire and retain a customer.
Key takeaways
- Total expected value from a customer over their lifetime.
- Driven by revenue, gross margin, and retention.
- Sets the ceiling on profitable acquisition spend.
- Often computed as ARPA times gross margin divided by churn.
Why it matters
LTV tells you how much a customer is truly worth, which bounds what you can spend to win and keep them. Longer retention and higher margin both multiply LTV.
How Ardovo handles it
Ardovo derives LTV from real revenue, margin, and retention data by segment, so the number reflects actual customer behavior. Rook flags which segments produce the highest-LTV customers to focus acquisition on.
Frequently asked questions
How is LTV calculated?
A common formula is average revenue per account times gross margin, divided by the churn rate. This estimates the discounted lifetime gross profit from a typical customer given how long they stay.
Why does retention matter so much to LTV?
Because LTV divides by churn: halving churn roughly doubles lifetime. Small retention improvements compound into large LTV gains, which is why keeping customers often beats acquiring more.