Understanding LTV, Churn, and Active Customers

Three Metrics That Matter

Your CohortGenie dashboard shows several numbers, but three of them come up in almost every advisory conversation: LTV, Churn Rate, and Active Customers. Here's what each one means and how CohortGenie calculates it.

Customer Lifetime Value (LTV)

LTV answers: "How much total revenue does a typical customer generate before they stop buying?"

The formula:

LTV = ARPU / Monthly Churn Rate

Where ARPU is Average Revenue Per User per month.

If your average customer pays $500/month and your monthly churn rate is 5%, your LTV is $10,000. That customer, on average, will generate $10,000 in revenue over their lifetime with you.

Why it matters: LTV tells you what a customer is worth. That number has direct implications for how much a business can afford to spend on acquisition, how to prioritize retention efforts, and whether the business model actually works long-term.

If your client's LTV is $2,000 but they're spending $3,000 to acquire each customer, that's a conversation you need to have — and fast.

Churn Rate

Churn rate answers: "What percentage of customers stopped transacting in a given period?"

CohortGenie calculates churn based on transaction activity. A customer is considered churned when they have no transactions in the selected period — based on actual transaction dates from QuickBooks, not account status or manual flags.

Monthly churn rate is the percentage of customers who were active in the prior period but had zero transactions in the current period.

Why it matters: A 5% monthly churn rate might not sound bad. But compound it over a year and you've lost 46% of your customer base. Churn compounds. Small improvements in churn have outsized effects on long-term revenue.

This is one of those numbers where the math surprises people. When you show a client that their "small" churn problem means replacing nearly half their customers every year just to stay flat, it changes the conversation.

Active Customers

Active Customers answers: "How many customers actually transacted in this period?"

This is a simple count — any customer with at least one transaction (invoice, sales receipt) in the selected time period counts as active. It's based entirely on transaction dates from QuickBooks, not on when the customer record was created or whether they have an open balance.

Why it matters: Active customer count is the foundation for every other metric. A growing customer count with flat revenue means your new customers are worth less than your old ones. A flat customer count with growing revenue means your existing customers are spending more. Both tell different stories about the business.

How These Connect

These three metrics work together. LTV depends on churn rate. Churn rate comes from tracking active customers over time. Together they tell you whether a business is building durable revenue or running on a treadmill.

When you sit down with a client and say "Your LTV dropped from $8,000 to $5,500 over the last two quarters because monthly churn went from 4% to 6%" — that's a specific, actionable insight. That's what CohortGenie is built to surface.

See Gross vs. Net Dollar Retention for the companion metrics that complete the picture.