Jeffrey, I agree with what you've put forward here. Anyone who is serious about their business should think in terms of lifetime value for a couple of different reasons:

1) It changes how much you might be willing to spend on customer acquisition. (Higher LTV = higher affordability for lead generation and payout.)

2) It changes how you THINK about each and every customer. A one-off purchase might be worth $100. A LIFETIME value might be $1,000 or more - particularly depending on the value of the product, the possibilities for up-selling, and of course, referrals.

One thing that I also advise people to do is to discount the FUTURE by a certain percentage to reel in the numbers and give them a more realistic perspective. While I can say with 95% confidence that a new customer this year will renew next year, I need to discount the probability as we project out to future years. A schedule might look like this:

Year 1 total customer value = 100%
Year 2 ... = 95%
Year 3 ... = 85%
Year 4 ... = 80%
Year 5 ... = 75%

The newer the business the more you have to discount because you don't have an established track-record from which to form an informed basis for the LTV calculation.

While you are very clear that you use "average" I still like to discount the future. A slightly more conservative approach ensures you don't over-spend while also still allowing for expanded investment in growth and retention.