LTV (Lifetime Value)

What is LTV?

LTV is the total gross profit a customer generates across their whole relationship with your brand, and in subscription health it is decided far more by how long they stay than by what they first pay.

The formula and a worked example

LTV = average order value × purchase frequency × customer lifespan × gross margin. The lifespan term is what dominates, so two customers on the same monthly price can differ several-fold in value. Work an example with round, illustrative numbers. A GLP-1 patient at $299/month who stays 18 months generates about $5,400 in membership revenue, and at a 60% gross margin roughly $3,240 in gross profit, which comfortably supports a $250–350 CAC under the standard 3:1 LTV:CAC convention. The same patient cancelling after three months is worth under $900 in revenue and about $540 in gross profit, breaking 3:1 at any CAC above roughly $180. Nothing about the offer changed; only the lifespan did.

Gross profit, not revenue

LTV must be built on gross profit, not top-line revenue, or it will overstate what a customer can fund. A $299 subscription that carries $150 of medication, pharmacy, clinician, and payment cost per month contributes about $150, not $299, toward repaying acquisition, so the margin term is what ties LTV back to your real contribution margin. Revenue-based “LTV” is the single most common way a health model talks itself into an unaffordable CAC.

Predicted, not promised

LTV is a forecast, so treat it as a range, not a fact. A brand two months old cannot credibly claim an 18-month LTV; it is extrapolating a lifespan it has not yet observed, and early cohorts often churn faster than mature ones. The safer discipline is to underwrite acquisition on a conservative, already-observed slice of LTV (say, the gross profit you can see by month six) and let the longer tail be upside, rather than spending today against a lifespan you are only hoping for.

Why it matters for health and DTC brands

For subscription telehealth and supplements, LTV is the ceiling on what you can spend to win a customer, and because it is retention-driven, the highest-leverage move on LTV is almost always improving retention rather than raising price. A brand that lifts month-three survival from 50% to 70% can raise its affordable CAC enough to outbid competitors on the identical offer. That is why first-order economics rarely tell the story: a GLP-1 or hormone program can break even (or lose) on order one and still be an excellent business if rebills reliably extend the lifespan. Model LTV against your own cohort curves rather than a headline multiple, and read it next to CAC and CAC payback to see both the return and the cash-flow timing. Check the ratio with the LTV:CAC calculator.

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