Your question is Explain LTV to SaaS Client. Take a moment with it on the right.
Talk me through your thinking if you like. When you're confident, submit your answer and I'll grade it like a real screen (7/10 or better passes).
NimbusCRM is a B2B SaaS company that sells subscription plans to small businesses. A client is questioning whether their paid acquisition program is sustainable because monthly marketing spend rose from $120,000 to $150,000 while new customer growth slowed from 1,000 to 900 accounts.
The client’s leadership team keeps hearing that "LTV is strong," but they do not understand what LTV actually means, how it is calculated, or how it should be used with CAC. Current metrics are: average monthly subscription revenue per account = $80, gross margin = 75%, monthly logo churn = 4%, and CAC = $420 per new customer. The sales team says enterprise customers have much higher value than self-serve customers, but finance wants one company-wide number for board reporting.
You are asked to explain LTV to the client in a way that is simple enough for non-technical stakeholders but still analytically correct. You should also clarify the assumptions behind the metric and when the metric can be misleading.
subscriptions: account_id, plan_type, start_date, end_date, monthly_price, billing_frequencyaccount_financials: account_id, monthly_revenue, discounts, refunds, cost_to_serve, gross_margincustomer_acquisition: account_id, acquisition_channel, campaign_id, acquisition_date, sales_cost, marketing_costaccount_activity: account_id, login_days, seats_purchased, feature_usage, renewal_date