Customer Lifetime Value (CLTV) is one of the most important factors in determining your business’ present and future success. It’s an often-overlooked metric that can accurately predict how much your customers are really worth. By measuring the net profit that you’ll take in over the course of your entire relationship with a customer, you’ll be able to narrow down exactly how valuable they are to your business.
CLTV gives you crucial insight into how much money you should be spending on acquiring your customers by telling you how much value they’ll bring to your business in the long run. Rather than just racing to keep your head above water, you’ll be able to understand which customers you should be focusing on and, more importantly, why you should be focusing on them.
The Startup Financial Model has very comprehensive CLTV calculations. Rather than simply modeling an overall CLTV for all customers and offering types (which is not particularly useful or insightful), our model includes all of the CLTV calcs for each offering type to really show clarity.
For example, if your offerings include selling a mix of one-time offerings, freemium offerings, standard offerings, and premium offerings, you will want to follow and track the CLTV calcs for all offering/customer types to compare and contrast to help you really fine-tune your model. You can ungroup and scroll across month-by-month, quarter-by-quarter, and year-by-year in the Sales detail report to see how the CLTV calcs change over time based upon your inputs. This is what both entrepreneurs and investors really want to see: the specific CLTVs by specific offerings to be able to pressure test the assumptions in the plan.
Our model meticulously calculates all sales, marketing, and account management expenses from lead generation expenses, to sales commissions expenses, to account management expenses for each offering, along with all of the other direct costs from COGS, Direct Labor, etc.
The CLTV calcs include all sales and account management-related expenses, including an allocation of general sales and marketing expenses to fully capture the total expenses. Here’s the simple version of what goes into the calculation in our model rather than drag you through all of the calculations:
CLTV Reports Include First Plan Year and Final Plan Year Infographics that Clearly Show the Key Metrics for Each Offering:
CLTV Reports Includes all Monthly, Quarterly, and Annual Views of All CLTV Inputs: