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What is the lifetime value of your client?

Use this handy spreadsheet template(MS Excel) to find out. This is an especially useful piece of information for advertising planning, generating referrals, valuing your business, and generally appreciating the value of each person who walks in your door, calls your phone numbers and/or visits your website, and buys something from you.

Calculating your Customer Lifetime Value can help you determine what you can afford to invest in sales and marketing, it also will help you identify other issues you may need to address. (What if you could keep them as your customer longer? ).

Click VIEW to see an example—Watch for the EXPANSION button to see a larger image clearly.

Perhaps the most critical question of all is how much can you afford to invest to acquire a new customer? Answering this question requires knowing your Lifetime Customer Value. LCV = NPV((Frequency of Purchases) X (Gross Profit) X (Duration as Customer) X (Referrals)).

Calculate the lifetime value of your customer

Plug in the amount of your initial sale and profit... Plug in the amount of follow-on sales, profits, and the % probability of customers who re-buy... How many years will they likely be a customer? How many (%) will pay for an added service?

Project the number of customers you will have, how much they will spend with you, and the profit you will make over time... Calculate the net present value (NPV -- the future value as today's value) of each customer.

Watch what happens when you change the "Duration as a Customer." Watch what happens when you change the "Number of Referrals Given Each Year"! This is a crucial tool from the JIAN MarketingBuilder family. In about 5 minutes you'll have some interesting answers and obvious direction(s) to take... it may astound you.

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