Build a disciplined view of LTV using contribution margin and retention assumptions rather than revenue alone.
LTV estimates the economic value of a customer relationship over time. The useful versions are explicit about three things: how much margin a customer generates, how long the relationship lasts, and how those future cash flows should be valued. That means revenue alone is not enough. High-revenue customers with poor contribution margin or weak retention can have disappointing lifetime value. Conversely, modest-revenue customers with strong retention and efficient servicing can be far more valuable. The discipline is simple: show the assumptions. If the model depends on constant churn, state it. If it assumes expansion, state where that pattern comes from.…
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