What is customer lifetime value (CLV or CLTV)?

The basic calculation: average revenue per customer per period, multiplied by the average number of periods the customer stays. A SaaS customer paying $200 per month who stays for an average of 24 months has a CLV of $4,800. For service businesses with project-based revenue, CLV is the expected total of all jobs from a client relationship — harder to model precisely, but still useful as a directional number.

CLV changes the calculus on how aggressively to pursue a specific invoice. A customer with a high CLV and a one-time payment problem warrants a careful, relationship-preserving approach. A new customer on their first invoice who has gone dark may not justify the same effort. CLV also sets the ceiling on what makes sense to spend on acquiring a customer — any acquisition cost that approaches CLV is a money-losing relationship by definition.