Also known as: Lifetime value, Customer lifetime value
The total revenue (or profit) a customer generates on average over the entire relationship — crucial for deciding how much you can invest in customer acquisition.
Formula (simplified): average monthly price × average retention in months. A SaaS customer at €100/mo who stays 18 months on average = LTV €1,800. For agencies this means: if average acquisition cost is €600 and LTV is €1,800, your LTV:CAC ratio is 3:1 (healthy).
An agency has 25 clients at €1,500/mo on average. Average retention 24 months. LTV per client = €36,000. Acquisition can cost €5,000-10,000 (LTV:CAC 4-7x) — premium acquisition channels are justified.
The percentage of clients who cancel within a given period (usually per month or year). Keeping churn low is essential to an agency's health, since winning new clients costs more than retaining existing ones.
The predictable monthly revenue an agency (or SaaS company) generates from subscriptions — a key KPI because it measures stable income, unlike one-off projects.
A pricing model where an agency (or software vendor) pays per active client they manage — instead of per user, per social account or per feature.
A pricing model where an agency (or software vendor) pays per active client they manage — instead of per user, per social account or per feature.
The predictable monthly revenue an agency (or SaaS company) generates from subscriptions — a key KPI because it measures stable income, unlike one-off projects.
The percentage of clients who cancel within a given period (usually per month or year). Keeping churn low is essential to an agency's health, since winning new clients costs more than retaining existing ones.
The total cost of winning one new customer — including marketing, sales hours and tooling. A healthy CAC is far lower than LTV (ratio of at least 1:3).
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