What’s the lifetime value of your clients? If you are able to answer this question with a precise calculation, you’ve got a serious advantage over your competitors.

Sadly, most business leaders don’t have a clue what this term means, and even fewer know exactly what this figure is for their business. As a result, the business owners (and by association, their employees) don’t come anywhere close to making as much money as they could.

In the next few minutes we’re going to provide you the critical information you need to be sure you don’t fall into this category of business owners. Once exposed to this powerful proven concept you’ll realize how you can literally shoot your net profits through the roof. With this new way of looking at your business your mind will open to a flood of breakthrough ideas that will help you increase the long-term stability and profitability of your business.

The client’s lifetime value (LTV) can be easily understood by looking at the total dollar value of your average customer over the entire course of time they do business with you.

Let’s look at an example of how the owner of a day spa calculated the lifetime value of her clients so you can follow the same formula for your business.

Working with her business coach, Tina determined that her clients stayed with her an average of three years. She had a total of approximately 1,500 steady clients at the time of her initial calculations. Her net profits over the past three years was \$780,000. (* Note: it is crucial that you use net profits here and not gross sales or total revenues.)

”Customer’s Lifetime Value (LTV) = \$780,000 / 1,500”

This told her that each new customer she got was worth an average of \$520.00 in net profits.

”Revolutionize Your Decision Making”

Now that Tina knows her LTV = \$520, she’ll be able to make better business decisions. Anytime she is choosing between different hi-impact marketing principles, she’ll know how to calculate her results to determine if her overall profits will increase or decrease as a result of each advertising decision.

The business owner who overspends (or more commonly, under-invests) without making decisions related to LTV will go out of business faster than the owner of the exact same type of business who calculates the LTV and makes decisions based on this accurate long range benchmark.

For example, if Tina runs an ad that costs \$1,000 and she gets just 15 new clients coming in and spending \$60 per sale, her revenue (15 x \$60 = \$900) won’t cover her advertising costs. Her competitors might consider this a losing proposition. But effective entrepreneurs like Tina who know their precise LTV will actually jump at this winning proposition.

Tina understands that every new customer she brings in represents an average lifetime value of \$520 in net profits. This allows her to see that all she’s invested is a mere \$66.27 per customer to get at least a \$520 return. (This is calculated by taking her initial \$1,000 investment in advertising and dividing it by the 15 new clients she’s just attracted to her business.)

Your marketing perspective is critical to outlasting your competition. When you realize that your clients are an ongoing revenue source rather than a one-time sale, you can shift your marketing focus.

”A Better Way …”

This one simple strategy from our new TeleCourse “Small Business, BIG Profits” can be used to increase your leads and sales without spending more on your advertising or marketing than you need.

This new understanding allowed Tom (the owner of an art gallery,) to quadruple his profits once he shifted his marketing perspective. Working with his coach, he implemented new strategies to harness the power of repeat clients who purchase from him again and again.

When Tom first started working with his coach, he was adamant that his business couldn’t take advantage of this concept (LTV) because he thought his business was reliant mostly on visiting tourists coming into his shop once or twice during their stay.

But once he realized how to turn his “one-time clients” who physically came into the store into repeat clients who buy from him again and again using the power of the Internet — Tom easily tripled his profits in a little over 16 months time. Plus, each month Tom doubles his profits, he has the ability to increase his business by 10 times or more because of the snowball effect of the LTV principle.

Once you understand how to attract more repeat sales using the Internet after clients are no longer physically near your store, you’ll be in another league among savvy entrepreneurs. As you implement each low-cost, hi-impact strategy you learn, you’ll quickly see your profits rising. You’ll feel a sense of relief knowing that you’ll be in business for a long time to come, provided you are continuously staying on top of cutting edge trends in business, and applying them before your competition does.

Business Strategy Tip: Start thinking of your clients with this new perspective. You’ll be amazed at how new ideas will enter your mind as a result of shifting your focus.

Learn everything you can about how to take advantage of the Internet to increase your profits. Most business owners are surprised to learn how they can increase their profits by having their own Web site, especially when they previously thought of their company as a “brick and mortar” type of business. There are so many ways businesses can use the Internet to increase their profits. Knowing these strategies constitutes 80 percent of your success. The other 20 percent is implementing the strategies in a systematic way based on proven methods that work.

”’Deborah Cole Micek is a Business Growth Strategist with RPM Success Group, Inc. (http:www.RPMsuccess.com) and facilitator of the new TeleCourse “Small Business, BIG Profits” — the complete manual of low-cost, hi-impact marketing. She can be reached at”’ mailto:Deb@RPMsuccess.com ”’or toll free at 888-334-8151.”’