Lifetime Client Value

Understanding Lifetime Client Value

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If you, my loyal blog reader, were to pin me in a dark ally at 2:00 AM and demand to know my number one piece of advice for growing a massive, life changing business, it wouldn’t take me very long to speak on that.

Even with the threats and back ally situation, I would still calmly and clearly explain to you the massively impactful concept of lifetime client value in your business.

Over the past 5+ years, I’ve been working with coaches, consultants, freelancers, service providers and entrepreneurs in many different capacities with the sole goal of helping them make more money in their businesses.

My biggest take away from having hundreds of conversations with business owners over many years is that 95% of entrepreneurs will never actually understand and internalize the concept of lifetime client value.

For example, most times, when I’m speaking to a potential student or client I ask them if they are willing to spend $1.00 in advertising costs to bring back $1.01 in business client revenue.

Most entrepreneurs initially say no to this question.

They rationalize that since they will have to spend time working with the client and since they obviously will have expenses and costs associated with delivering value to that client, that it isn’t worth it and that they’ll lose money on the client.

I’ve even had conversations with business owners (many actually) who tell me, and have convinced themselves, that they “cannot afford to advertise at all” because the cost of advertising just eats into their “client margins” to0 much.

If you don’t understand the average lifetime value of a client that works with you and if you don’t have a simple, consistent way to convert a percentage of your up front clients into higher value back end clients, then I understand why you think this way.

I know that in my business, because of the simple way my programs are structured, I can afford to spend $3.00 up front to bring on a client at $1.00 for my initial program.

Wait, what?!

You may be thinking, “how is that possible!”

You are LOSING $2.00 on the initial client AND you’re working with that client?

Yup, it’s true, and the only reason I’m able to do this is because I understand the total lifetime value of a new client that I bring on.

On average, one out of every three clients I work with will end up working with me again, and at a much higher investment level.

I understand that because of the way my business is structured, I can easily afford to actually lose money on my initial client acquisition because I know for a fact that I’ll turn one out of every three new clients into a much higher dollar back end client.

Because of this fact, I have no problem paying top dollar to acquire new clients in my business and I can pay significantly more than what my competition can pay.

Once you fully understand the lifetime value of each client that comes into your business, you can quickly figure out at what dollar amount bringing on a new client becomes worth it.

Once you figure out exactly how much you can afford to spend per new client, the income ceiling will be removed in your business because you’ll never struggle to bring on clients profitably again.

Summary: Once you figure out exactly how much the average new client is worth in your business over the lifetime of that client working with you, you can immediately figure out how much you can pay to acquire new clients profitably and consistently.

Action Steps: 

  1. Make sure you have a system in your business to consistently and seamlessly convert your most successful clients into more lucrative and long term clients.
  2. Work your system and figure out what percentage of your new clients convert into higher end clients at an elevated price and program level.
  3. Once you figure out that percentage, you should then be able to figure out exactly how much a new client is worth to you over the lifetime of that client.
  4. Take that number and then figure out how much you are comfortable spending to bring on a new client.
  5. Feel confident bringing on front end clients, even at an initial loss, because you’ll know that a certain percentage will turn into more lucrative, profitable clients.
  6. Rinse and repeat until you have a massive, scalable business.

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