Life Time Value (LTV) Excel Spreadsheet Calculator

Excel calculator and explanatory article to help you work out your LTV.

by David Skok
General Partner at Matrix Partners

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Description
The old formula really commonly used to work out LTV stops being effective when you have negative churn and particularly long customer lifetimes. It doesn't reflect real life circumstances when LTV can have no end point. This provides a more recent method of calculating LTV built on DCF analysis that includes associated risks with distant future revenue, and the time value of money. To aid companies in deeper understanding and to manage future revenue streams is the resulting LTV. It gives a more accurate reflection of what an investor is more likely to pay for that future cash flow.

The majority of this article is more relevant for SaaS businesses that no longer have a profitable, scalable, and repeatable sales process, and are deep into their phase of expansion. As an early stage SaaS startup who is continuing to try to achieve market/product fit, or is still trying out different methods of making your sales and marketing scalable and repeatable in a predictable way, you should mess around with LTV and CAC to try and figure out roughly where you are. You should take into consideration that the formulae given here will only produce results that mean something when your marketing processes, sales processes, and costs are scalable and predictable. In place of overthinking LTV and CAC, concentrate your efforts towards trying to find a solution for your issues with market/product fit, and trying to get your customer acquisition to a point where it makes money, its scalable, and its repeatable.

[Co-authored by Stan Reiss.]

This business tool includes
1 Excel Calculator, 1 Explanatory PDF Article