Do You Know Your Lifetime Customer Value?

Calculating your LTV could be one of the best exercises you do in your business. For those of you who are not familiar with this term, Lifetime  Customer Value relates to the dollar worth any of your customers/clients have to your business in their lifetime – or in other words; for the term they stick with you.

If you’re in the business of selling products or providing services, knowing your LTV can give you a crystal-clear picture on the health of your business.

Forecast business trends

Calculating your Lifetime Customer Value can not only help you save money, but it will give you a road map to  organize yourself. Trying to figure out averages in your business is often a hit-and-miss affair unless you calculate with real figures.

A critical person might argue the same to be true when we calculate LTV, but I would counter that with practice the figures will stack up more solidly with the latter.

Young company/business

If you are just starting out in your venture then this exercise is admittedly not accurate right off the bat. The fastest way to getting close-to-reality calculations is by making them frequently – as often as every month – until you start to see a common trend with your clients.

How to calculate Lifetime Customer Value?

Doing this by hand is complicated for the mathematically challenged – actually for most people. It is far easier to grab one of the free online templates to help you get your figures on the fly and one of the places you can do so is  at the ZeroMillion website.

Grab your data

Before you can use the free spreadsheet from the site you need to grab your client data. Ideally you want to cover your whole trading period, but if you are new then you can also calculate this month by month if need be.

You’ll need:

• Number of customers you have
• Number of sales made
• Total sales value
• Length of average customer relationship
• There are other options on the spreadsheet too and I encourage you to try this out because you will gain valuable business insights.

Fact is that calculating these figures can save you a LOT of money, time and frustration. You’ll be surprised about the dollar worth each of your customer has to you, which is even more reasons to treating them well.