Customer Lifetime Value (LTV) is the single most important metric for subscription businesses. It tells you exactly how much revenue a single customer will generate over their entire relationship with you. If you know your LTV is $500, you know you can afford to spend up to $150 (CAC) to acquire them and still be profitable.
Churn is the enemy of LTV. As this calculator demonstrates, even a small reduction in Churn (e.g., from 5% down to 3%) can nearly double your customer's lifetime value. This is why successful SaaS companies prioritize "Customer Success" teams just as much as Sales teams.
A healthy SaaS business typically aims for an LTV:CAC ratio of 3:1. This means for every dollar you spend on marketing and sales, you get three dollars back in lifetime value. If your ratio is 1:1, you are growing broke. If it's 5:1, you aren't spending enough on growth.