The total gross profit a business expects to earn from a single customer throughout their entire relationship before they churn.
Why it matters: LTV dictates how much you can afford to spend on acquiring a customer (CAC). High LTV businesses can outspend competitors on marketing and still remain profitable.
In practice: A customer pays $100/month with an 80% gross margin. If the average customer stays for 24 months, their LTV is ($100 * 0.8) * 24 = $1,920.