What is a customer worth to a local business?

Set the average job, jobs a year, years a customer stays and the margin. Get the lifetime value of a customer, what a lead is worth at your close rate and the value an agency creates, with the formula shown. Free, no account.

Customer lifetime value

Example with the default assumptions. Pick a trade or change any number.

For a local business at $500 a job, 1 job a year for 5 years and a 40% margin, a customer is worth $1,000 in gross profit ($2,500 in revenue). At a 25% close rate, each lead is worth $250.

$1,000Lifetime value (gross profit)
$2,500Lifetime revenue
$250Value of one lead
lifetime revenue = job x jobs a year x years = $500 x 1 x 5 = $2,500 lifetime value = revenue x margin = $2,500 x 40% = $1,000 value of a lead = lifetime value x close rate = $1,000 x 25% = $250 value created = new customers a month x lifetime value = 2 x $1,000 = $2,000 a month

The defaults are round-number assumptions, not survey data; replace them with the business's own figures.

What it means for an agency

An agency that brings this business 2 new customers a month creates $2,000 of lifetime gross profit each month, $24,000 a year. A monthly fee that is a small share of that is easy for the owner to justify; what share to charge is your call.

How customer lifetime value is worked out

Lifetime revenue is the average job times the jobs a customer buys a year times the years they stay. Lifetime value here is that revenue times the gross margin, the profit left after materials and labor. The value of a lead is the lifetime value times the share of leads that become customers: the most the business could spend to win one lead and break even over the customer's life.

Picking a trade fills in starting values. They are round-number assumptions for a typical job in that trade, not data from a survey, and they vary widely by city and business. Every value is an input you can change.

Using it in a pitch

Business owners think in jobs, not clicks. Show them what one new customer is worth over the years and the monthly fee for a website, reviews or ads looks small next to it. Then price your own work with the website pricing calculator.

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Questions

How do you calculate customer lifetime value for a local business?

Average job value times jobs per year times years a customer stays gives lifetime revenue; times the gross margin gives lifetime value in profit.

How much is a lead worth?

Lifetime value times the share of leads that become customers. With a $2,000 lifetime value and one in four leads closing, a lead is worth $500.

Are the trade presets real averages?

No. They are round-number starting assumptions so the calculator shows something useful at once. Replace them with the business's own numbers.

How much can an agency charge a local business?

Start from the value you create: new customers a month times their lifetime value. A fee that is a small share of that is easier to sell. This calculator does not set the price for you.

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