> ## Documentation Index
> Fetch the complete documentation index at: https://relate.so/docs/llms.txt
> Use this file to discover all available pages before exploring further.

# Customer Lifetime Value (LTV)

> Lifetime Value (LTV) measures how much a customer will pay for our service over time.

## Overview

Lifetime Value (LTV) measures how much a customer will pay for our service over time."

## What is Lifetime Vlaye?

Lifetime Value (LTV) measures how much a customer will pay for our service over time. You can calculate how much revenue a typical customer will generate with LTV.

### How to Calculate LTV

To calculate LTV, multiply your average annual profit per customer by the average lifetime of a customer.

<Card title="LTV Formula" icon="lightbulb" iconType="duotone">
  LTV = Average Annual Profit Per Customer \* Averate Lifetime of a Customer
</Card>

## Related Content: CAC (Customer Acquisition Cost)

<Tip>
  [What is Customer Acquisition Cost (CAC)?](https://relate.so/docs/wiki/cac/)
</Tip>

## Why CAC and LTV are important?

You can check the profitability of your product by considering the LTV:CAC ratio.
It is ideal when the LTV is greater than the CAC, which means that the revenue you generate from a customer is greater than the cost of acquiring the customer. Therefore, you can still profit with a higher LTV even with a high CAC. On the other hand, if you have a low LTV, you might have low profitability even with a low CAC.