The Phenomenal Potential Lifetime Value (PLV) of a Client

In his book The Facts of Business Life, my friend Bill McBean says a business owner’s first responsibility is to protect its assets. Not just the assets on the balance sheet, but your database as well. My good friend and marketing master David Frey says, “The money is in the list!” Not just the number of people on the list, but the quality of the list. And the quality of the relation- ships you’ve developed with them.

Have you ever thought about the value of your list? Have you ever thought about the potential lifetime value (PLV) of a single client? This exercise will astound you and from this moment on you will have a greater appreciation for your clients. Far too often a customer’s value is judged by a single transaction. They bought a low-priced product or did a minimum job. It’s about the long-term value of that client and their referrals.

Many years ago when I was first starting out, I quoted a very low mini- mum charge over the phone, assuming it was a “minimum” job. Upon arriving, I realized I had totally underpriced myself for the project. Instead of making excuses, I smiled and went to work. After all, it wasn’t her fault that I didn’t have a good pricing system! Turns out the client was the facilities manager for the largest branch banking system in Texas at the time, which became my biggest account the next day. I made a lot of money from that bank for many years. Had I made excuses and judged her based on how much money she spent with me on that first project, I would have never got- ten the big account.

Take a moment to jot down the average amount a single client invests with you each year. Now multiply that by 20 years. Example: Let’s say a single client invests $2,000 per year with you. Twenty years x $2,000 = $40,000. Now, multiply that number by the number of referrals you could potentially get. Let’s say it’s just two per year. That’s an additional $80,000 in potential lifetime value, giving you a total potential lifetime value of $120,000!

This is how you should look at the economic value of clients (while also remembering that they are human beings who should be treated well). Are you planning on being around for 20 years? I’ve been in business over 28 years at this writing. Protect your assets. The most valuable asset is your client list. When you sell your business, the predictable income is probably going to be the biggest factor. And by the way, if you teach your team to value customers at this level, will it make a difference in how they see them? You bet it will.