How this number is made
A simple lifetime value is what a customer spends, minus what it costs to serve them. Discounting later years is the grown-up version. This page does not discount. It is a planning sketch, and the years-they-stay number is the soft one.
- Cost to serve is support, goods, and shipping over the whole life, not one order.
- Do not include the cost to acquire them here if you want to compare LTV with CAC on the next page. Or include it, and then do not subtract CAC again.
Formula
Lifetime value = average order × orders per year × years − cost to serve.
Worked example
With the figures already in the form, lifetime value after the cost to serve is $760.
Questions
Should future purchases be discounted?
Yes if they are far away and uncertain. This page leaves them undiscounted so the assumption stays visible.
What if they cancel?
Then the years figure was too high. Use the average life you have measured, not the life you want.