Customer Lifetime Value
Money
Customer Lifetime Value (CLV) is a prediction of the total value of a customer to your business over the entirety of their relationship with you. For SaaS companies, this is crucial as it aids in making significant decisions regarding sales, marketing, product development, and customer support.
Formula
(Average Revenue Per Customer (ARPC) * Gross Profit Margin) / Customer Churn Rate
Example
If a SaaS company's ARPC is $100, the gross profit margin is 80% (or 0.8), and the customer churn rate is 5% (or 0.05), then the CLV is $1,600. This means the business can expect to generate $1,600 from an account over its lifespan, on average.