Customer Lifetime Value (LTV)
The total amount of money you'll make from one customer over the entire time they do business with you, including repeat jobs and referrals.
Full Definition
Customer Lifetime Value goes beyond the first job to include all future work that customer will give you, plus any customers they refer to you. For concrete contractors, this might include an initial driveway job, followed by a patio project two years later, plus referring their neighbor for a walkway.
Formula
averageJobValue= average dollar amount of initial customer jobrepeatJobMultiplier= how many additional jobs the average customer gives youreferralValue= average revenue generated from customer referralsExample
Initial job: $8,000 × 1.5 repeat jobs = $12,000. Plus average referral value of $1,600 (20% referral rate × $8,000 average referral job). Total LTV = $12,000 + $1,600 = $13,600
For Contractors
Why It Matters
Most contractors only think about the immediate job, but your average concrete customer is worth $12,000 over their lifetime, not just the $8,000 first job. This means you can afford to spend more on marketing to acquire customers, knowing you'll make it back. If you know your LTV is $12,000, you could spend $400 per lead instead of $42 and still be profitable long-term.
Real-World Example
A concrete contractor in Phoenix lands a $8,000 driveway job. Two years later, the same customer hires them for a $6,500 patio. Three years after that, they refer their neighbor who books a $4,800 walkway project. That one original customer generated $19,300 in total revenue over five years, making their true lifetime value $19,300, not just the initial $8,000.
Common Mistakes
- -Only counting the first job value when calculating what you can spend on marketing
- -Not tracking repeat customers and referrals, so you never know your true LTV
- -Treating all customers the same instead of investing more in high-LTV customer segments
- -Focusing only on getting new customers instead of maximizing value from existing ones
What to Do
Pull your customer records from the last 3 years and identify 10 customers who hired you multiple times or referred others. Add up all the revenue from each relationship (original job + repeat work + referral revenue). Divide by 10 to get your average LTV. Use this number to justify higher marketing spend on quality lead sources.
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