how to calculate the ltv of a customer
Now that youâve got your average customer lifetime, calculating LTV is easyâ¦. LTV = (Avg. Monthly Subscription Payment x Gross Margin %) / Churn Rate. So, say your business has an average monthly subscription payment of $19.95 and sells at a gross margin of 50% and has a monthly churn rate of 3%.
The very first step in establishing your LTV would be to calculate the average lifetime of your customers. This is as easy asâ¦. Lifetime = 1/Churn. Itâs important to keep in mind that the time scale over which you calculate your customer churn rate will affect the outcome of this equation. For example, if you calculate your churn rate in terms of months then this equation will produce your lifetime in terms of months.