LTV stands for Lifetime Value and represents the sum of all profits generated from a single client throughout their entire relationship with the company.
To calculate LTV use this formula:
Lifetime Value = [(Average Order Size ($)) - (Direct Order Expenses ($))] x [Average Number of Repeat Orders (#)]
E-Shop sells T-Shirts for 20$/piece. Their average order size is 5 T-Shirts and Production Costs are 10$/piece. An average customer returns 5 times to repeat a purchase.
LTV = (20$ - 10$) x 5 = 50$