How is the Lifetime value metric calculated in Revenuestory?

Problem Statement

This article explains how the Lifetime Value (LTV) metric is calculated in Revenue Story.

Solution

LTV is the average revenue a subscription generates until it cancels. It represents the financial worth of a subscription during its lifetime.

Formula

• Average Revenue per Paid Subscription (ARPPS) = Total MRR ÷ Total Active Paid Subscriptions
• Churn rate % = (Churn for the month ÷ Total active paid customers at end of month) × 100
• Subscription lifetime = Inverse of the average of the last three months' churn percentage
• LTV = Subscription lifetime × ARPPS

Example

• End of January: 600 active paid customers, 10 churn → churn rate = (10 ÷ 600) × 100 = 1.6%
• End of February: 590 active paid customers, 20 churn → churn rate = (20 ÷ 590) × 100 = 3.4%

Repeat for subsequent months. The inverse of the average churn percentage for the last three months gives the subscription lifetime; multiplying by ARPPS gives LTV.