Customer Lifetime Value (CLV)
Customer Lifetime Value (CLV or LTV) is the total revenue a customer is expected to generate over their entire relationship with your company, adjusted for gross margin. It is the numerator in the most important ratio in SaaS — LTV:CAC.
Why Customer Lifetime Value (CLV) Matters for SaaS Companies
CLV determines how much you can afford to spend acquiring a customer. If your CLV is $10,000, spending $5,000 to acquire that customer is a great deal. If your CLV is $3,000, that same $5,000 acquisition cost is a path to bankruptcy. For Seed to Series B companies, accurately calculating CLV is what separates realistic financial models from wishful thinking.
Formula
CLV = ARPA x Gross Margin % / Monthly Churn Rate
Benchmark
Healthy B2B SaaS CLV: 3x+ your CAC. Median B2B SaaS CLV: $15,000-$50,000 depending on segment.
Tools for Measurement
An Operator's Take
The biggest CLV mistake I see is founders using theoretical lifetime instead of observed lifetime. Your model says customers stay 36 months on average, but your company is 18 months old — you have no idea if that is true. At BatchService, the projected CLV based on early cohorts was $24,000. When we tracked actual behavior over 12 months, realized CLV was closer to $14,000 because mid-market accounts churned faster than expected. That 40% gap changed every downstream decision — from CAC budgets to pricing strategy.
Common Mistakes
What I see go wrong at Seed to Series B companies.
Using revenue instead of gross margin in CLV calculations. If your gross margin is 75%, your real CLV is 25% lower than the revenue number.
Projecting CLV based on assumed lifetime rather than observed churn data. If your company is 2 years old, you cannot claim a 5-year customer lifetime.
Not segmenting CLV by customer tier, acquisition channel, or cohort. Your enterprise CLV might be 5x your SMB CLV — the blended number helps no one.
Ignoring expansion revenue in CLV calculations. If customers regularly upgrade, your CLV is higher than the simple ARPA/churn formula suggests.
What to Do This Week
Concrete steps you can take right now.
Calculate CLV using actual observed churn rates from your oldest cohorts, not projected lifetimes.
Segment CLV by customer plan tier and acquisition channel. Find your most valuable customer profile.
Compare CLV to fully-loaded CAC. If the ratio is below 3:1, prioritize retention improvements over acquisition spending.
Use the Unit Economics Health Check to benchmark your CLV against industry standards.
Related Resources
Try These Tools
Further Reading
Frequently Asked Questions
What is a good CLV for B2B SaaS?
CLV varies significantly by segment. SMB SaaS typically sees $5,000-$15,000 CLV. Mid-market ranges from $15,000-$75,000. Enterprise can exceed $100,000. The absolute number matters less than the ratio to CAC — aim for at least 3:1 LTV:CAC regardless of your segment.
How is CLV different from LTV?
They are the same metric. CLV (Customer Lifetime Value) and LTV (Lifetime Value) are used interchangeably in SaaS. Some companies use CLTV. The calculation is identical regardless of the acronym.
How do you increase CLV?
Three levers: reduce churn (customers stay longer), increase ARPA through upsells and expansion (customers pay more), and improve gross margins (you keep more of each dollar). For most Seed-B companies, reducing churn has the fastest impact because it compounds — every month of extended lifetime adds another month of revenue.
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