LTV (Lifetime Value, or CLV) is the total profit a customer brings over the whole time they buy from you. It lets you see the customer as a long-term revenue source, not a one-time deal.
LTV sets the natural ceiling for your marketing budget: if a customer brings you $5,000, spending $1,000 to acquire them is a smart decision. Without knowing LTV, you don't know how much you can spend.
LTV:CAC — the key ratio
LTV isn't read alone — it goes with CAC. In a healthy business the LTV:CAC ratio is usually at least 3:1 — each customer brings three times more value than the cost to acquire them. As the ratio nears 1:1, growth stalls.