Customer Lifetime Value (LTV) for consumer startups and what it really means with Kent Bennett Ep 4

Key Takeaways
There is no standard way to calculate Lifetime Value (LTV), but that doesn’t stop everyone from talking about it! When investors ask for LTV, we think they’re really asking three different things.
1. Does a business have real margins? It’s important to understand a consumer startup’s True Variable Profit (TVP), which can be found by taking revenue and subtracting the cost of goods sold (COGS), but also subtracting all other reasonably variable costs (asking yourself whether at 10x the volume you’re likely to need close to 10X spend on the expense item.) Credit card, shipping fees, warehousing, local team members, and more should be fully allocated to understand the true margins of a product or service.
2. How do the dollars flow in and out of a business over time? Based on a cumulative profit curve, startups can make smarter decisions on how to invest dollars to grow. The best consumer startups are extremely disciplined and insist on rapid returns on marketing dollars invested.
3. How big could this get, really? Although inherently flawed and impossible to truly calculate, even crude LTV measures can speak to the size of a particular consumer opportunity.
Kent Bennett on Consumer Earthquake Startups
Episode 1: Consumer startups are earthquakes not just unicorns
Episode 2: How to build a truly great product to power a consumer earthquake
Episode 3: The most important metric for consumer startups (and why it isn’t churn)
Episode 4: How to calculate Customer Lifetime Value (LTV) for consumer startups and what it really means
Episode 5: Why consumer startups should obsess over their Resting Growth Rate (RGR)
Episode 6: Four core moats of long-term defensibility for consumer startups
Full article: bvp.com/atlas/c...
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