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E202: LTGP vs. LTV: Why Gross Profit Matters More

by Sean Boyce

In this episode, Sean introduces the concept of Lifetime Gross Profit (LTGP) as a powerful metric for B2B SaaS businesses. Instead of focusing solely on revenue and the traditional Lifetime Value (LTV) metric, he emphasizes the importance of considering gross margin and profit. By subtracting the cost of goods sold from revenue, businesses can calculate their LTGP and gain insight into their actual profitability. Sean explains how this metric helps identify whether a business is on track to becoming self-sustaining and financially healthy.

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Key Points

  • Focusing on profit or gross margin is crucial for building a profitable B2B SaaS business.
  • LTGP (Lifetime Gross Profit) is calculated by subtracting the cost of goods sold from revenue.
  • LTGP provides a more accurate picture of a business’s profitability compared to LTV.
  • Businesses should consider tracking LTGP instead of LTV for better financial understanding.
  • Low profitability numbers require early detection to make necessary corrections.
  • Monitoring LTGP helps ensure alignment with industry standards and best practices.
  • Improving profitability leads to a healthier financial and economic standing for a business.