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Assuming there's no business being added.
1*0.7*0.8 = 56% retained, or 44% churn
Lifetime you would need to know the churn for the forseeable future to do the above,
Makes sense. So what I'm doing is calculating LTV. It's 30% first year, 20% every year thereafter. Doesn't that approach zero?
Also, when I'm calculating LTV, would I use two periods worth of customer value? E.g., if the annual gross margin per customer is $20, if I was just to calculate LTV on year 1, it would be (1/.3)*20, whereas year 2, would it be (1/.44)*20, or (1/.44)*40? Does that make sense?
I will follow all your posts to SB every single one if you can help with this (srs). Thank you again.
Just looking for a new tech sales job if any of your portfolio companies are hiring.
I'll check, I'm just an associate so not a decision maker but if we have roles open at the portocs I cover I'll PM you and do what I can.
I'm assuming this is enterprise software?
Yes Correct. So 30% year 1 and 20% after. 1*.7*.8 until near zero. So in terms of percent currently still retained: 100 70 56 44.8 35.84 28.67 22.93 18.35 14.68 11.74 9.39 7.51 6.01...to zero eventually.
I would consider it to be the average in a pool of customers. So the above times net margin. It would give you the lifetime value of the "average" customer.So 1.00*20 + .70*20 + .56*20 + .448*20 + .3584*20... for as far out as you want. I would personally go out as far as non-zero as possible as some customers do stay on forever.
You can also use a net present value weight number as well if that's something you want to do.
Keep in mind i'm not an accountant or banker, but simply work in enterprise software and this is how we would calculate our customer LTV.
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