Question 1

What is Customer Lifetime Value (LTV)?

Accepted Answer

Customer Lifetime Value (LTV or CLV) is the total revenue a business can expect from a single customer over the entire relationship. Formula: LTV = Average Purchase Value × Purchase Frequency (per year) × Customer Lifespan (years). For example, a customer who spends $50 per order, buys 4 times/year, and stays 3 years has an LTV of $600.

Question 2

How do I use LTV to set my max CPA?

Accepted Answer

Your maximum CPA (Cost Per Acquisition) is the most you can afford to pay per customer while remaining profitable. Formula: Max CPA = LTV × (Gross Margin% / 100). If your LTV is $600 and gross margin is 40%, your max CPA is $240. Staying below this number ensures each acquired customer is profitable over their lifetime.

Question 3

Why is LTV important for Google Ads and Meta Ads?

Accepted Answer

LTV lets you bid aggressively and outspend competitors who only think in first-purchase terms. If your LTV is $600 but a competitor's is $100, you can afford a much higher CPA and still be profitable. This is the key lever that separates growing ad accounts from stagnant ones.

Question 4

What is a good LTV to CAC ratio?

Accepted Answer

A healthy LTV:CAC ratio is generally 3:1 or higher — meaning you earn at least $3 in lifetime value for every $1 spent to acquire a customer. SaaS businesses often target 3–5×; e-commerce typically aims for 3×+. Below 1:1 means you're losing money on each customer.

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Why LTV is your most important ad metric