2 {{ upvoteCount | shortNum }}
2 {{ upvoteCount | shortNum }}

Lifetime Customer Value/Profit & Overhead

by PaulintheSticks
1 replies
I'm still grappling a little with the formula for lifetime customer profit as it relates to overhead.

I assume that unless more infrastructure has to be added to handle sales/new clients that overhead is not figured into the equation....strictly hard costs like commissions and cost of goods sold. So in other words, lcv would be based on gross profit, instead of net.

But, if your receptionist or secretary has to work overtime because you're getting so many more calls, his extra salary would need to be figured into the equation.

Am I thinking straight?

Thanks.
#customer #lifetime #overhead #value or profit
  • Profile picture of the author Blase
    Normally "most" business owners know
    what their profit margins are so if you
    use the standard.

    Average sale =
    + number of purchases per year
    X how many months/years

    They know what that means to them.

    You could certainly take the gross amount and
    multiply it by their net profit.

    Adding more infrastructure should be justified by the
    sales growth, which should work out to a wash and the
    net profit should remain fairly constant.

    Hope that helps.
    Signature
    "Nothing Happens Until Something Is Sold"
    {{ DiscussionBoard.errors[2903926].message }}

Trending Topics