Customer Lifetime Value (CLV)
Definition
The total profit a business expects to earn from a customer over the whole relationship. Comparing it to the cost of acquiring a customer shows whether growth spending is sustainable.
Related Terms in Financial Analysis
Customer Acquisition Cost (CAC)
The average cost of winning a new customer, including sales and marketing spend divided by the number of customers acquired. It is central to judging the efficiency of growth.
Churn Rate
The percentage of customers or recurring revenue lost over a period. Low churn is critical for subscription businesses, where retained customers compound into predictable revenue.
Gross Margin vs Net Margin
Gross margin measures profitability after only the direct cost of goods sold, while net margin is after all expenses, interest and tax. The gap between them shows the weight of operating and financing costs.
Liquidity Ratios
A family of ratios — current, quick and cash ratios — that measure a business's ability to meet short-term obligations from its short-term assets. They are early warning signs of cash trouble.
Stop memorising terms — let HelloBooks do the work
AI-assisted bookkeeping that handles invoicing, GST, reconciliations, and reports automatically. Free to start.