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Do You Know the Lifetime Value of Your Client?

How much is the average client worth to your business?  Not just per project or even per year, but for the lifetime of your business.  Calculating the lifetime value of a client is an eye-opening exercise I recommend to every small business owner.

Repeat business

Let’s take several examples.  A client who eats a $15 lunch at your restaurant every Monday is worth $780 for one year and $2,340 for three years.  It really adds up, doesn’t it?

A personal services business, such as a chiropractor, massage therapist, manicurist, or hair stylist has a similar business model where hopefully they can attract repeat clients.  A client who gets a $20 manicure once every two weeks is worth $520 per year and $2,600 in five years, and that does not include the tips.  Grocery stores, hardware stores, clothing stores, and office supply stores are just a few industries with similar models.

Large purchase with add-ons

Some businesses rely on a larger but less frequent purchase than some of the industries listed above.  This may include furniture stores, airlines, and computer sales.  Many of these larger purchases can be increased by adding service contracts, delivery charges, financing charges, and by selling more items.

Some businesses will benefit from becoming aware of the lifetime value of their vendors, partners, and employees.  For example, contractors are often reliant on their subcontractors to deliver great services so they can complete the construction projects.  Landscaping firms make great partners with nurseries and bring them much business.  And employees who sell and close large contracts can have a lifetime value to your business of millions in some cases.


One way all businesses can increase the lifetime value of a customer is by counting the amount of referrals the customer sends you.  Let’s say Marni bought $500 and was so impressed with you that she sent three clients your way.  They each bought $1,000.  Marni is now worth seven times what she originally purchased from you:  $3,500.  When each of these new clients refer more people and buy more in subsequent years, Marni’s value to your business gets bigger.

This might just have you treating your clients like Marni with a lot more respect!

Multiple service lines

The more products and services you offer, the greater your opportunities for increasing the lifetime value of your customers.   Let’s say Katie buys a $500 product from you in January.  In May, she comes back and wants the $2000 service you talked about in a newsletter you sent her.  She’s so happy she refers two clients to you that buy $1,000 apiece.  What can start out as a $500 client has now morphed into a $4,500 client and can easily mushroom into a five-figure client by the end of the year.  I’m sure it’s happened to you over and over again.

Take some time next week to create a spreadsheet that shows you the lifetime value of your clients.    I’ll think you’ll be pleasantly surprised to see how valuable your current clients really are.  If you need help with the calculations, let us know.  We’re here to help.

Are You Working on All the Wrong Things?

Have you ever gone through your list of things to do and looked for the easiest thing to knock out first?  Have you ever been moody when you’ve looked through your tasks and said to yourself, “I don’t feel like doing that one, that one, or that one?”  Do you have some items on your to do list that have been there for a while (like months)?

If so, you’re not alone.  However, you may be working on all the wrong things.  One of the top time management secrets that smart business owners implement is to prioritize their tasks in a very special way:  by the highest payback, and not the biggest sense of urgency.

The hard truth is we may not be able to get to every single thing we want to do, especially those of us who are creative business owners who have an idea every minute!  You may have a lot of them captured on your to do list, and some may still be swimming around in your head.

One of the ways that you can choose your opportunities and slim down that ever-growing to do list is to understand the concept of return on investment.   For each task, how much money could it bring you if you did it?  Some of the items that are not urgent but incredibly profitable are often the items we’re too exhausted to do once we complete all the required client and compliance work we need to do.

The successful business owner will make time for those profitable but not urgent activities.  In fact, they will do them first thing in the morning before checking their email or returning calls.

Here’s an exercise to try on your own to-do list.  Assign a dollar value to each task on your list in terms of revenue potential or cost savings.  If you got to that task, how much could it save you or make you?

Then the fun starts.  Sort your to-do list by this new dollar value column you just added.  Sort the highest payback tasks to the top and the lowest payback tasks on bottom.

What’s jumping out at you on the top of your list that you’re not getting to?  Can you find a time on your calendar to do it this week?

When we step back, become more proactive about insisting that we get a return on our time for what we’re doing, we can make a really huge difference in our bottom line.  It’s as simple as assigning some values to the tasks on our to-do list, and then re-sorting them by that value.

However you identify them, the goal is to bring to our attention our highest potential revenue opportunities so we can act on them.   Even if you only get to one more per week than you are currently doing, you’ve made wonderful progress.

It may take some discipline to resist tackling the urgent tasks.  When we accomplish our urgent tasks, we feel needed.  We love rushing to the rescue of clients that need us. When we attempt our high-dollar tasks, it may be a little uncomfortable, even scary.  So that’s why we avoid them.

Prioritizing is something we all have to do, since we live in a world that competes for our limited time.  Prioritizing by highest dollar return on investment is something the most successful business owners do, even if it feels a little uncomfortable in the process.

When we do the serious work of choosing what is really going to move our business forward, we will see the changes in our revenue.  If we can help you with any of your high-payback tasks, let us know.

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