A forecast of the net profit attributable to a customer’s entire future relationship. To calculate LTV, for a given time period, take the revenue paid to you by the consumer during that time period. Subtract the gross margin from that figure. Divide by the customer’s projected turnover rate (also known as cancellation rate). (For example, if a client pays you $100,000 per year with a 70% gross margin on revenue and that customer type is expected to cancel at 16% per year, the customer’s LTV is $437,500.)
