Ratio = CLTV ÷ CLTR
Since CLTV is CLTR multiplied by gross margin, the ratio reduces to gross margin.
It carries no new information. That is the point.
Use it as a reconciliation
These two figures are usually produced by different people: lifetime revenue by a revenue or planning team, lifetime value by finance or a growth team. They routinely embed different assumptions without anyone noticing.
If the ratio does not equal your reported gross margin, at least one of these is true:
- Different churn rates were used in the two calculations.
- One is capped at a horizon and the other is not.
- Different cost-of-revenue definitions.
- Different segment mixes.
Any of those means the two numbers cannot appear in the same deck without a note, and the ratio is the cheapest way to catch it.
A worked example
CLTV $29,900 and CLTR $39,360, both capped at five years on the same cohort.
Ratio = 29,900 ÷ 39,360 = 0.76
Which matches a 76% gross margin, so the two are consistent.
If CLTR had been quoted uncapped at $106,667 against the capped CLTV, the ratio would read 0.28, implying a 28% gross margin that does not exist anywhere in the business. The mismatch is the finding.
The traps
- Presenting it as an independent metric. It is an identity.
- Comparing it across companies, where it is just their gross margin.
- Ignoring a mismatch rather than reconciling it, which is the one thing the
ratio is for.
Where this sits
Measurement in the Tenbound Pipeline Architecture Standard, in its narrowest role: an internal consistency check rather than a number to steer by.