CLTV helps companies understand the long-term impact of their customers and their value to the organization. It is like figuring out how much a friend is worth to you.

Here’s how it works:

Friendship Begins:

When a new customer starts using your SaaS product, it’s like making a new friend.

Time and Value:

You calculate how long this friend (or customer) is likely to stay with you and how much they will spend on your product during that time.

Friendship Benefits:

You also consider how much value this friend (customer) brings. For a SaaS startup, this means not only the money they pay but also how they might refer others or give feedback that helps your product improve.

Calculating CLTV:

To find the CLTV, you add up all the money, and value (referrals, feedback) this customer brings during their time with your product.

Better Friends Are More Valuable:

Customers who stay longer, spend more, spread more, and help your product grow are like the best friends who bring the most value.

So, for a startup SaaS product, CLTV is about understanding how much each customer is worth over their “friendship” with your product. It helps you focus on making and keeping valuable “friends” who stick around and support your business.