How to calculate LTV
The simple formula is average monthly revenue per subscriber divided by monthly churn rate. A subscriber paying $6 a month on a service with 5% monthly churn has an LTV of about $120, because the average subscriber stays around 20 months.
For a truer figure, multiply by gross margin. If delivery, payment fees and store commission take 30% of revenue, the same subscriber is worth about $84 in margin.
What drives LTV
- Churn: the strongest lever. Cutting churn from 5% to 4% raises LTV by a quarter
- Price and tier mix: revenue per subscriber each month
- Extra revenue: rentals, tickets and advertising on top of the plan
- Costs per subscriber: delivery, commission and any per-subscriber platform fee
LTV and CAC
LTV matters most set against customer acquisition cost. If a subscriber is worth $120 and costs $40 to acquire, the ratio is 3 to 1, a commonly cited healthy level. Below 1 to 1, every new subscriber loses money.
The simple formula assumes churn is constant. In practice new subscribers leave faster than long-standing ones, so check the estimate against how real cohorts have behaved.
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