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SaaS Lifetime Value (LTV):
Calculating and Optimizing
Lifetime Value (LTV)
Price Intelligently’s SaaS Metric Mondays
Let’s talk about LTVYour SaaS company’s key to longevity
Lifetime Value (LTV)
LTV = Lifetime Value
Lifetime Value (LTV)
LTV =The total dollar amount you’re likely to receive from an individual customer over the life of their account with
you. Lifetime Value allows for you to accurately account for and predict your businesses revenue and profit.
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Lifetime Value (LTV)
Here’s LTV broken down visually
Lifetime Value (LTV)
Visuals and definitions are great but…why should you
even care?
Lifetime Value (LTV)
“Want your SaaS to last? LTV is the fountain of youth, the key
to your SaaS company’s longevity”
Lifetime Value (LTV)
More specifically…
Understanding your LTV can help
Identify customer personas who result in the best retention, as
well as the highest opportunity for
expansion revenue
SalesImprove projections and
help accurately determine the companies profitability
FinanceMarketingIdentify which channels and
marketing programs bring in the best
customers
See the breakdown of your LTV with ProfitWell >>
Lifetime Value (LTV)
Lets go deeper and calculate LTV like a #SaaS superstar
Lifetime Value (LTV)
In your LTV calculation you only want to include active customer in your “ARPA metric” & Fully
churned customers in the “customer churn metric”
LTV Criteria Breakdown
Items to Include Items to ExcludeARPA
(Average Revenue Per Account)
Inactive Users
Customer Churn Delinquent Customers
Lifetime Value (LTV)
Calculating LTV is all about ARPA & Churn
LTV EQUATION:
LTV SIMPLIFIED:
EXAMPLE:LTV
LTV Calculation Breakdown
Lifetime Value (LTV)
ARPACustomer Churn Rate
Sum of all customer MRR / Total # of customers
# of customers who churned / Total # of customers
$100 ARPA0.1 Churn
Rate$1000 LTV
Once you master calculating LTV you can
benefit your SaaS business even more by
optimizing it
Lifetime Value (LTV)
Extend your LTV lifespan by:
1. Cross-sell / upsell add-ons
2. Product line expansion
3. Scalable pricing along a value metric
Lifetime Value (LTV)
Grow your customers’ LTV by building add-on revenue into your product. Be sure to find add-ons that supplement both LTV through increased revenue, but also retention. Check out
companies like Appfolio for a great example.
Key OptimizationCross-sell – Upsell
Visitors
Stranger
Leads
Opportunity
Customer
Lifetime Value (LTV)
Give customers not only add-ons, but entirely new products. You already have them in the door, so
make sure you capitalize on that relationship through adding pieces of product to their workflow.
Key OptimizationProduct line expansion
Lifetime Value (LTV)
PRODUCT
Build your pricing in away that supports growth by utilizing a value metric. This allows you to get at all points on the demand curve, ensuring you’re
making more revenue as your customer uses your product more.
Key OptimizationScalable Pricing
Lifetime Value (LTV)
Boom. Now you can maximize your SaaS longevity with your
new mastery of LTV
Lifetime Value (LTV)
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most accurate metrics on the market
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Lifetime Value (LTV)
