The big challenge with CLV you could easily dismiss it as old news, and even roll your eyes at it too…
Old news making a come-back:
Remember those plate sized black vinyl discs we used to play on record players? Or if you were a hi-fi snob, like I was, you’d call it a turntable!
My double-bass-playing music-obsessed middle son, is currently collecting ‘vinyl’ just like I did as a teenager – I find this funny in a world with iTunes and Spotify and YouTube. He tells me they sound better and they are making a come-back.
Like vinyl records, CLV deserves to make a come-back too…
CLV (customer lifetime value) is a simple sum:
CLV = Total fees spent with your firm during their life with you as your client.
Keeping it simple: You’ve just lost a client after 7 years together. They have paid £3,500 every year since they started working with you. CLV is 7 x £3,500 = £24,500.
If your average fee is £3,500 and average lifetime of a client at your firm is 7 years then every new client has a future CLV of £24,500.
Why does CLV matter to your accountancy firm?
When did you last have a conversation about what you must do to extend the lifetime of your clients?
A focus on CLV forces you to take more seriously your firm’s customer care. Are you going to work harder to take care of your £24,500 clients compared with £3,500 clients?
CLV makes you look at your clients slightly differently and also have different conversations with them too. You may be tempted to better understand their expectations of you and your firm so you know what you must do to keep them.
Your firm’s capital value is at stake…
Clearly, if your CLV number is reducing then either your clients are staying with you for fewer years or your average fee is shrinking. Either way the capital value of your firm is shrinking. And you have to find more clients to replace the losses, so your firm’s fee growth is less. And the extra work this requires makes you less profitable.
The best KPI’s for an accountancy firm…
I am close to conducting 900 1-on-1 meetings with the partners of accountancy firms in recent years – every meeting has been focused on growing profits through smarter marketing.
These 900 meetings have shown me which KPI’s are the best ones at helping accountancy firm’s focus on growth.
In the 12 years we’ve been doing this we have identified 39 KPI’s that profoundly and positively impact on the results accountancy firms achieve. CLV is the fortieth! If you’d like a list of the other 39 (with my suggested weighting on the most impactful KPI’s) then get in touch and we’ll send you the information. Call 01773 821689 or email firstname.lastname@example.org
How have you used CLV to influence the behavior in your firm?
How have you used CLV to influence the way your business owner clients think?
Creator of ‘Business Bitesize’ – cultivating a greater flow of new clients for your accountancy firm through profitable word-of-mouth –http://www.businessbitesize.com/
Author of ‘Bamboo Marketing For Accountants’ – the route map to marketing success for accountants in practice –http://www.bamboomarketingforaccountants.com/
And let’s get LinkedIn http://www.linkedin.com/in/paulshrimpling or visit our LinkedIn company page