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Why should lifetime value be calculated on gross profit rather than revenue?

  1. A Revenue-based LTV makes unprofitable customers appear valuable
  2. B It is easier to calculate
  3. C Revenue is not available
  4. D Regulators require it
Answer

Revenue-based LTV makes unprofitable customers appear valuable

Payback period also matters: a strong LTV to CAC ratio with a two-year payback is still a cash flow problem.

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