discounted LTV
Also called: discounted lifetime value, discounted customer lifetime value
The contribution margin a customer is expected to leave over a stated horizon, with each future period converted into today's money at a discount rate.
Discounted LTV is the contribution margin a customer is expected to leave over their life with you, with each future month (or year) converted into today's money. It answers the question an acquisition budget really asks: how much is a new customer worth now, against the CAC you pay now?
Two corrections turn a slide-friendly LTV into a finance one. First, use contribution margin, not sales or GMV: what the customer pays includes money that leaves at once to suppliers, tutors or payment providers. Second, discount: contribution that arrives a year later is worth less, because the money could have been used meanwhile and because later cash is less certain. Month k is divided by (1 + r)ᵏ, where r is the monthly discount rate.
State the horizon you used (for example 12 months) and the rate. A capped horizon makes the number conservative; a long horizon makes it depend on retention assumptions far in the future. Compare it with CAC, and pair it with the payback month and the cash needed to wait for it.
Example
Klasna's October 2025 cohort: 60 families acquired with 240,000 UAH of ads (CAC 4,000).
September's 448.95 per family, a year after acquisition, is worth 448.95 / 1.02¹¹ = 361.07 today. The cumulative contribution passes the 4,000 CAC in the fifth month (February).
Common mistakes
- LTV on revenue or GMV. It inflates the ratio several times over (7× instead of 1.92× in the example).
- No discounting on long horizons. The further out the contribution, the more it shrinks.
- An unstated horizon. "LTV" without a horizon and a rate can't be checked or compared.
- Treating LTV/CAC = 3 as a law. Pair the ratio with the payback month and the cash the wait requires.
- Ignoring cash timing. Late-paying B2B customers and prepaying customers have the same LTV but very different cash payback.
Learn it in the course
- Discounted LTV and CAC payback in cash · What a customer is worth in today's money and when their acquisition cost comes back.