This past week I had to fire the landscaping company that I'd been with for almost 3 years.
It all boiled down to the fact I felt multiple issues remained unresolved and that my concerns were going unheard…
For example, it was the 3rd time my For Sale By Owner Sign had been hit.
You can see the results here –
Now, you may be thinking -” big deal – so you fired your yard guy?”
Well, it just so happens this was someone I'd paid monthly to take care of everything – weeds, the lawn, flower beds and this was the same company I'd hired for the initial install when building our house.
And now, that the house is for sale – guess who I'd planned on using?
You betcha – It was these guys.
That is until multiple issues like the one I just explained.
Now, here's the reason for this post and the takeaway…
First of all, I'd spent almost $12,000 in 3 years with this company as they were the only ones to touch my grass.
Plus, I'd planned on using them for the next build – which if we calculate that into the equation that would be roughly $5,000 (if we're figuring it low).
That's a $17,000 customer gone over a $20 sign.
Sounds crazy – right?
But that's not even counting the revenue from the future maintenance of my yard while we sold our home or after we build our next home or the fact that I've been responsible for getting them other jobs with other builds.
Most businesses are so consumed with getting new customers that they often overlook the real profit center which is maintaining, nurturing, and encouraging repeat business.
You've probably heard it before – the real money is in the back end.
And it all boils down to knowing the Lifetime Value of a Customer.
No one taught me this in college.
The first time I'd even heard the words where from a Jay Abraham training I'd bought.
I've embedded one of Jay's videos below that I highly recommend you watch right now.
This one concept can literally change your business immediately no matter if you're an affiliate marketer, local seo company, a local gym, or a landscaper.
So, if the average ticket is $50
And the average customer buys 2 time per month.
And the customer sticks for an average of 5 months.
Then the Lifetime Value in this case is $500
Let's use a real life example.
Suppose we're helping a local gym.
And the average ticket per month is $55.
And suppose the average customer stays for 18 months.
So, $55 per month X 1 charge per month X 18 Months = $990.00
In this case, the lifetime value is $990 per customer.
Now, the business owner can decide how much to spend to get their average customer.
We'll go more into those options in a future post, but for now…
What if hypothetically we could get the customer spending more than just 1 time per month?
That's where we'd really start to grow the business offering them other products and services.
Our goal would be to increase the amount they spend per transaction and to boost the number of transactions they make.
For the gym example, these include…
While this seems rather simple, this is how you scale.
The bottom line is that you know your numbers in the first place.
This is the same process I took to turn around a local, struggling business that I knew nothing about.
The first week we took over, I figured the average ticket per person was $45 and some change and I knew how many times they were repeat customers.
Most businesses have no clue what their numbers are.
Once you get the numbers, it's now a matter of simple math on how much you're willing to invest in order to bring in new customers.
It really is that simple.
Advertising and marketing is an investment in your business to bring in new faces while building a herd of hard core fans.
And if you're able to have the highest Lifetime Value of your competition – then you can afford to invest more in your marketing for bringing in new customers.
You can outspend them to buy new leads.
But again, it all starts with knowing your numbers.
In closing, if you want to really help your business, the company you work for, or for your clients – the first thing you can do is know the numbers.
Not only will this help them by knowing their numbers, but once you figure it out – you're able to use that in negotiating your services.
For example, lets suppose you're pitching your SEO services to a cosmetic dentist.
And you find out the average client is worth $4,000.00
Are you still going to pitch your services for $400 per month?
I think not. 🙂
Let me know your thoughts in the comments below…
Derek Pierce is an online marketer specializing in Search Engine Optimization. He used his SEO to escape over $100,000 in credit card debt building a 6 figure business from a spare bedroom.