What Exactly Is My Lifetime Customer Value

As an internet marketer and a business owner, I am very interested in providing the most value to and for my clients. No matter what industry your business serves, knowing your lifetime customer value is absolutely vital to map out your future financial goals. So what does lifetime customer value actually mean anyway? The lifetime value of your customer/client means how much one person is worth to your business over the length of time they do business with you.

Let’s dig a little deeper…

Depending on the company and industry, there are a wide range of variables and outcomes in business. For example, a personal injury attorney will generally have one case per client and the case may not get settled for years. On the other hand, a hair stylist will have a number of clients who visit them multiple times each year. Now in the example of the personal injury attorney, their client’s case can fetch anywhere from 10’s of thousands to millions of dollars, while the average hair stylist client may bring in a few hundred to a few thousand dollars per year.

Now some businesses have a high turnover rate like a restaurant or a hotel and the customer may not spend as much per visit but they serve quite a bit of people in any given year. On the flip side our trusty personal injury lawyer depending on the size of the firm, may only take on 5 or 10 big cases per year.

Generally, I like to look at a 12 month time span when calculating lifetime customer value. Of course these numbers will vary from a few months to 10 years plus in some instances. So if I’m a chiropractor who charges say, $250 per visit and I see my patients once a month, the math would break down as such: ($250 * 12 months = $3,000.00). So in this case every current and potentially new patient would be worth $3,000 dollars to my practice per year.


Know Your Numbers

What I have found interesting in my conversations with business owners of all types is, 95% of the entrepreneurs that I’ve talked to have no clue what their customer value is. A lot of the time they never even heard of the term! This is extremely important to know for so many reasons but I’ll discuss three here. First, knowing these numbers allow you to really get specific about your company’s yearly financial goals. Secondly, it gives you the opportunity to tailor your products and services to meet the caliber of customers/clients you have and attract new ones on that same level or higher. Last but not least, you can zero in on the amount of money you can afford to spend to acquire new customers with paid advertising.

Most of us are in the habit of setting financial goals in the beginning of the fiscal year that we intend to reach. It may sound like this, ” I want to make $1,000,000 dollars this year”! Well how many people does your company need to serve to achieve that goal of 1 million dollars? Simple, you have to figure out your CLV. By knowing what that number is specific to your business, you can figure out exactly how many customers you need in a given year to accomplish that million dollar dream.

Maybe you only want to serve high ticket clients, or you feel like you can charge more because your product or service is different and waaaay better than your competitors. Here is a great opportunity to raise your prices and provide so much value to your clients and new leads that it becomes a no-brainer for them to spend their hard earned money with you. By knowing that magic number, you can make sure you’re staying competitive with your pricing yet getting paid more due to value overload.

Having a marketing budget is crucial if you don’t have the time nor energy needed to gain free traffic to your website and/or physical location. Retaining customers matter, but new customer acquisition gives excitement and fuel to your business. As business owners we’re proud of what we’ve built and we intend to let the whole world know about it! This is where paid advertising comes in with platforms like Facebook Ads and Google Ads.

Today, there are many different platforms you can run paid ads on to attract new people. If you could spend $1 on ads and get $7 back in return, how much would you be willing to invest? Better yet if you knew your CLV was $1,000 over the course of a year, how much would you be willing to cough up to get that $1000 customer? You could spend up to $999.00 and still be profitable. Now what if you didn’t know your CLV was only $400.00 yet you were spending $500.00 to acquire a new customer? You’d be losing money faster than you can blink! This is why you must absolutely know your numbers.


Sales Data To Increase Profit

Some of us hate crunching numbers and analyzing sales data, but it should be clear by now that knowing your numbers will help you reach your sales goals faster. Figure out what customer lifetime value is for your business and get crystal clear on how you can increase that number by providing more value. By providing the most value in your current industry, you will stand out from all the noise in your market and become the best choice over your competitors. By increasing the value you provide to your clients/customers, you will also be able to justify your pricing model for your product or services. Take a deep look at what’s been working for you so far, how you can improve on that based on the data, and what products and services you can remove that don’t work to make your business grow faster.