How To Calculate Lifetime Revenue

The customer lifetime revenue is not the actual historic reportable revenue rather an estimate or projection of all revenues during the customer lifetime.

How to calculate lifetime revenue. Combine these two metrics to create a ratio of revenue per customer to the cost per customer. In accounting the terms sales and revenue can be and often are used interchangeably to mean the same thing. Part 1 average customer lifetime the average amount of time a customer remains loyal to your brand and by loyal i mean that they keep coming back to make purchases or refer new customers. Although extensive the lifetime clv shouldn t be considered a conclusive research method.

Enter lifetime revenue. How to calculate lifetime value ltv ltv represents the revenue profit you will receive from a customer over your entire relationship not just from a single sale but from all revenue generating activities you engage in with that customer. Customer lifetime revenue definition for saas customer lifetime revenue is a simpler variant of the customer lifetime value calculation. To truly solve this problem and empower our marketing team to make data driven decision about their spend we needed a way to calculate the future value of the subscribers.

One way to analyze acquisition strategy and estimate marketing costs is to calculate the lifetime value ltv of a customer. Now let s start to calculate customer lifetime value. Part 2 average top line revenue. Using a simple example if a customer purchases 1 000 worth of products or services from your business over the lifetime of your relationship and the total cost of sales and service to the customer is 500 then the ltv is 500.

Calculating your ltv will help you calculate the customer acquisition cost or cac. This can help calculate how much revenue a customer can contribute in their life cycle with you. In the simplest form ltv equals lifetime customer revenue minus lifetime customer costs. Roughly defined ltv is the projected revenue that a customer will generate during their lifetime.

How is lifetime value useful to other saas metrics. As long as the ltv cac. The customer lifetime value ltv also known as lifetime value is the total revenue sales revenue sales revenue is the income received by a company from its sales of goods or the provision of services. Customer lifetime value is broken into three main parts.

Using the revenue generated from a customer will almost always overestimate the customer s true lifetime value because it doesn t factor in the costs of things like employees building and or equipment lease and advertising. Customer lifetime revenue is an estimate of the lifetime revenues for a customer. In fact without factoring in costs clv is usually referred to as customer lifetime revenue clr.