Customer Lifetime Value (LTV)
The total gross profit a business expects to earn from a customer over the entire relationship. LTV is driven by average revenue, gross margin, and retention, and is most useful when compared against CAC.
Related terms
Annual Recurring Revenue (ARR)
The value of a subscription business’s recurring revenue normalized to a one-year period. ARR excludes one-time fees and is the headline growth metric for most B2B SaaS companies.
Monthly Recurring Revenue (MRR)
The predictable subscription revenue a company expects to receive each month. MRR is tracked alongside its components — new, expansion, contraction, and churned MRR — to understand growth drivers.
Customer Acquisition Cost (CAC)
The total sales and marketing cost required to acquire one new customer, calculated by dividing those costs over a period by the number of customers won. CAC is a core measure of go-to-market efficiency.
LTV:CAC Ratio
The ratio of customer lifetime value to acquisition cost, used to judge whether a GTM motion is economically sustainable. A ratio around 3:1 is a common benchmark for healthy B2B SaaS.
CAC Payback Period
The number of months it takes for the gross profit from a customer to repay the cost of acquiring them. Shorter payback periods mean faster, less capital-intensive growth.
Net Revenue Retention (NRR)
The percentage of recurring revenue retained from existing customers over a period, including expansion and after accounting for churn and contraction. NRR above 100% means the customer base grows revenue even with no new logos.
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