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Module: 1. AAU Agency/Module 1 - Mindset Tracking 10
Lesson: 08. LTV - Lifetime Value of a Client
Duration: 08:41
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[00:00 -> 00:07] All right, so in this lesson, we are going to be talking about the LTV or the lifetime
[00:07 -> 00:09] value of a customer.
[00:09 -> 00:15] And the reason I put it in here was I think this is important for you to understand before
[00:15 -> 00:19] you go into the part where you start talking to potential clients.
[00:19 -> 00:26] You start to qualify them a little bit differently after you go through this lesson.
[00:26 -> 00:30] And the reason is is because how much is a customer really worth to you?
[00:30 -> 00:35] When you start a business, you know, a lot of times you get really caught up by that
[00:35 -> 00:36] number.
[00:36 -> 00:43] Like today I could make, you know, if they pay me $750 to set their campaign up for $1000,
[00:43 -> 00:45] you're really stuck on that value.
[00:45 -> 00:51] And it really can cloud your judgment when it comes to working with the right types of
[00:51 -> 00:52] clients.
[00:52 -> 00:55] So a couple of things you need to keep in mind are number one, how many clients do you
[00:55 -> 00:56] want?
[00:56 -> 01:01] There are agencies I know that they go out and they don't care.
[01:01 -> 01:03] They just want numbers.
[01:03 -> 01:07] That may be something that you want, but it's not necessarily something that, you know,
[01:07 -> 01:09] I personally want.
[01:09 -> 01:11] I don't want to have a hundred clients to manage.
[01:11 -> 01:12] That's just too many.
[01:12 -> 01:16] I would rather have fewer clients that pay me more money.
[01:16 -> 01:22] With that said, do I just want all my clients or, you know, all my money coming from like
[01:22 -> 01:24] four or five clients?
[01:24 -> 01:26] I personally don't.
[01:26 -> 01:29] The more a client pays you, the more you're at their beck and call.
[01:29 -> 01:32] So bigger isn't always better.
[01:32 -> 01:33] And here's what I mean by that.
[01:33 -> 01:34] I have a friend.
[01:34 -> 01:40] She runs an agency and she literally only has five clients at a time.
[01:40 -> 01:48] Now these clients are massive and I mean huge companies with monster marketing budgets.
[01:48 -> 01:54] And it's a little surprising to me that they don't have their team internally inside
[01:54 -> 01:55] their company.
[01:55 -> 02:00] But regardless, she does a great job and they love her.
[02:00 -> 02:04] But here's the problem is that when you're spending the kind of money that these Fortune
[02:04 -> 02:09] 500 companies are spending, you are at their beck and call.
[02:09 -> 02:11] Meaning you might be talking to them daily.
[02:11 -> 02:17] You might be talking to them more than once a day because they're spending 30, 40, 50,000
[02:17 -> 02:21] dollars a month and they're advertising, they need to know what's going on.
[02:21 -> 02:26] Another problem with clients that are that big is the fact that what happens if you lose
[02:26 -> 02:29] one or two of them, right?
[02:29 -> 02:33] You are going to take a massive, massive revenue hit.
[02:33 -> 02:38] You're going to feel that a lot more if you lose one of those big dogs than you are if you
[02:38 -> 02:42] lose, you know, a small, a smaller client.
[02:42 -> 02:43] So keep that in mind.
[02:43 -> 02:45] It's really a personal preference.
[02:45 -> 02:49] I choose not to have a bunch of big clients like that.
[02:49 -> 02:55] I choose to have as few clients as possible, but the big ones are just not really something
[02:55 -> 02:57] that I've never been interested in.
[02:57 -> 02:59] So what kind of customer do you want?
[02:59 -> 03:05] Do you want specifically, you know, small clients, the startups?
[03:05 -> 03:12] I don't because the small clients tend to be very cash strapped and you know, they're
[03:12 -> 03:16] sometimes they get a little bit desperate, but we'll talk a little bit more about that
[03:16 -> 03:19] when it comes to qualifying clients.
[03:19 -> 03:24] But do you want, you know, the customers that are $500 a month or do you want the customers
[03:24 -> 03:26] that are $1,500 a month?
[03:26 -> 03:31] And of course, you would probably say, well, I want $1,500 a month clients.
[03:31 -> 03:36] When you have a client that's paying you $1,500 to manage their ad spend, one thing you need
[03:36 -> 03:40] to understand is you need to show them that return on investment.
[03:40 -> 03:46] You need to make sure that not only are you getting money back that covers their advertising
[03:46 -> 03:52] spend, so maybe they're spending, you know, $3,000 a month in their advertising, but you
[03:52 -> 03:58] need to get enough money to cover your fees as well and show them a good return on investment.
[03:58 -> 04:04] So if they're spending $3,000 on ads, $1,500 on you, not only do you need to make sure that
[04:04 -> 04:09] they're bringing in $4,500 a month just to cover that, but they better be making a significant
[04:09 -> 04:10] profit.
[04:10 -> 04:14] So the more that they're paying you, the more you need to cover.
[04:14 -> 04:20] Sometimes it's easier to cover, you know, people that are paying you less.
[04:20 -> 04:25] We have clients all over the board, just so you understand that once you start a client
[04:25 -> 04:28] at a certain price doesn't mean you have to keep it there.
[04:28 -> 04:33] I've started out with clients at $1,500 a month and found that, you know what, we're
[04:33 -> 04:38] not really giving them the greatest return, but I want to keep this client.
[04:38 -> 04:40] So I just drop their monthly fee.
[04:40 -> 04:45] And you know what, because I did that, it was easier to show them a better return.
[04:45 -> 04:48] And we still have that client to this day.
[04:48 -> 04:52] If we were to keep going at the numbers that we were going at, we were going to lose that
[04:52 -> 04:53] client.
[04:53 -> 04:55] So what I want to do is I'm going to show you how to figure that out.
[04:55 -> 04:59] And I'm going to show you the lifetime value worksheet that I've got here.
[04:59 -> 05:02] This is a very, very simple look at it.
[05:02 -> 05:03] Okay.
[05:03 -> 05:08] But it's something I want you to think about when you're talking to potential clients.
[05:08 -> 05:10] I don't want you to focus on the set of fee.
[05:10 -> 05:15] Let's just say for argument's sake, we have a $750 set up fee.
[05:15 -> 05:20] Now if we're talking to that client and it's maybe it's a smaller client, right?
[05:20 -> 05:24] Maybe you're thinking only a $500 management fee.
[05:24 -> 05:27] Here's where I want you to change your thinking.
[05:27 -> 05:32] Because if you go to just land this client and you don't do a very good job and they're
[05:32 -> 05:37] only with you for two months, you're only going to get about $1,750 a revenue.
[05:37 -> 05:42] You're going to get $750 set up fee and you're going to get $1,000 a monthly management
[05:42 -> 05:45] fee because they've been with you for two months for a total of $1,750.
[05:45 -> 05:46] Okay.
[05:46 -> 05:48] Take a look at this now.
[05:48 -> 05:52] Same client, same monthly management fee.
[05:52 -> 05:54] What if you have them for a year?
[05:54 -> 05:57] Well that number goes up pretty significantly, right?
[05:57 -> 05:59] 75500.
[05:59 -> 06:01] What about two years?
[06:01 -> 06:05] What about three years?
[06:05 -> 06:10] I'm four and five.
[06:10 -> 06:12] Look at this number now.
[06:12 -> 06:17] I don't go into a client looking at them like I want them for two months or three months
[06:17 -> 06:20] or four months because this is peanuts.
[06:20 -> 06:25] What I do when I talk to a client is do I have the potential to be working with this client
[06:25 -> 06:27] at this point?
[06:27 -> 06:32] Because I have a lot of clients that I've worked with for four and five years.
[06:32 -> 06:37] So I'm looking at numbers like this who are paying me, you know, basically buying me
[06:37 -> 06:42] a car but I show them a great return on investment.
[06:42 -> 06:44] Now just switch this up.
[06:44 -> 06:47] What if you're working with clients that are a little bit bigger?
[06:47 -> 06:49] See how much those numbers go up?
[06:49 -> 06:53] That 30,000 becomes $45,000.
[06:53 -> 06:58] Just between $500 and a $750 set up management fee.
[06:58 -> 07:00] You can play with these numbers.
[07:00 -> 07:06] But I don't want you to look at a possibility of a client just because I need the money.
[07:06 -> 07:08] It's a $750 set up fee.
[07:08 -> 07:13] I'm going to take them for $500 a month and hopefully will happen for three months.
[07:13 -> 07:18] You need to look at this as is this a client that could be long term and this could be
[07:18 -> 07:25] the potential revenue because this is a monster number compared to this and you need to think
[07:25 -> 07:28] of it like that and you're probably like, well, yeah, but it's four or five years down
[07:28 -> 07:29] the road.
[07:29 -> 07:35] When you're working with a client this long, that client, everything is on autopilot.
[07:35 -> 07:38] They're typically not high maintenance clients.
[07:38 -> 07:40] You're going to keep on for four or five years, right?
[07:40 -> 07:43] Because you don't want to work with them anymore if they're that high maintenance.
[07:43 -> 07:49] These are clients that I've worked with for so long that I mean, you know, we just have
[07:49 -> 07:53] a when we speak to each other, I know exactly how the conversation is going to go.
[07:53 -> 07:55] I know that they're not high maintenance.
[07:55 -> 07:58] I know that they want to keep in touch.
[07:58 -> 08:03] I've had a hand in their business for four or five years, which helps make them successful.
[08:03 -> 08:12] I know, yes, they paid me $45,000, but I know I've made them back 10 or 20 fold this number.
[08:12 -> 08:16] So take a look at this calculator, play with it a little bit.
[08:16 -> 08:21] You know, maybe you want to start out with small clients, maybe a $500 setup fee, maybe you're
[08:21 -> 08:23] at $400 a month.
[08:23 -> 08:28] People over three months, you know, you can get $1,700 a revenue off that.
[08:28 -> 08:33] But you know, if you keep that client long term, see what that ends up being?
[08:33 -> 08:38] No longer is it a $500 fee you're looking at, but $24,000 in revenue.
[08:38 -> 08:39] All right.
[08:39 -> 08:40] Hope that helps.
[08:40 -> 08:41] See you in the next video.

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--- FULL TRANSCRIPT ---
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All right, so in this lesson, we are going to be talking about the LTV or the lifetime value of a customer. And the reason I put it in here was I think this is important for you to understand before you go into the part where you start talking to potential clients. You start to qualify them a little bit differently after you go through this lesson. And the reason is is because how much is a customer really worth to you? When you start a business, you know, a lot of times you get really caught up by that number. Like today I could make, you know, if they pay me $750 to set their campaign up for $1000, you're really stuck on that value. And it really can cloud your judgment when it comes to working with the right types of clients. So a couple of things you need to keep in mind are number one, how many clients do you want? There are agencies I know that they go out and they don't care. They just want numbers. That may be something that you want, but it's not necessarily something that, you know, I personally want. I don't want to have a hundred clients to manage. That's just too many. I would rather have fewer clients that pay me more money. With that said, do I just want all my clients or, you know, all my money coming from like four or five clients? I personally don't. The more a client pays you, the more you're at their beck and call. So bigger isn't always better. And here's what I mean by that. I have a friend. She runs an agency and she literally only has five clients at a time. Now these clients are massive and I mean huge companies with monster marketing budgets. And it's a little surprising to me that they don't have their team internally inside their company. But regardless, she does a great job and they love her. But here's the problem is that when you're spending the kind of money that these Fortune 500 companies are spending, you are at their beck and call. Meaning you might be talking to them daily. You might be talking to them more than once a day because they're spending 30, 40, 50,000 dollars a month and they're advertising, they need to know what's going on. Another problem with clients that are that big is the fact that what happens if you lose one or two of them, right? You are going to take a massive, massive revenue hit. You're going to feel that a lot more if you lose one of those big dogs than you are if you lose, you know, a small, a smaller client. So keep that in mind. It's really a personal preference. I choose not to have a bunch of big clients like that. I choose to have as few clients as possible, but the big ones are just not really something that I've never been interested in. So what kind of customer do you want? Do you want specifically, you know, small clients, the startups? I don't because the small clients tend to be very cash strapped and you know, they're sometimes they get a little bit desperate, but we'll talk a little bit more about that when it comes to qualifying clients. But do you want, you know, the customers that are $500 a month or do you want the customers that are $1,500 a month? And of course, you would probably say, well, I want $1,500 a month clients. When you have a client that's paying you $1,500 to manage their ad spend, one thing you need to understand is you need to show them that return on investment. You need to make sure that not only are you getting money back that covers their advertising spend, so maybe they're spending, you know, $3,000 a month in their advertising, but you need to get enough money to cover your fees as well and show them a good return on investment. So if they're spending $3,000 on ads, $1,500 on you, not only do you need to make sure that they're bringing in $4,500 a month just to cover that, but they better be making a significant profit. So the more that they're paying you, the more you need to cover. Sometimes it's easier to cover, you know, people that are paying you less. We have clients all over the board, just so you understand that once you start a client at a certain price doesn't mean you have to keep it there. I've started out with clients at $1,500 a month and found that, you know what, we're not really giving them the greatest return, but I want to keep this client. So I just drop their monthly fee. And you know what, because I did that, it was easier to show them a better return. And we still have that client to this day. If we were to keep going at the numbers that we were going at, we were going to lose that client. So what I want to do is I'm going to show you how to figure that out. And I'm going to show you the lifetime value worksheet that I've got here. This is a very, very simple look at it. Okay. But it's something I want you to think about when you're talking to potential clients. I don't want you to focus on the set of fee. Let's just say for argument's sake, we have a $750 set up fee. Now if we're talking to that client and it's maybe it's a smaller client, right? Maybe you're thinking only a $500 management fee. Here's where I want you to change your thinking. Because if you go to just land this client and you don't do a very good job and they're only with you for two months, you're only going to get about $1,750 a revenue. You're going to get $750 set up fee and you're going to get $1,000 a monthly management fee because they've been with you for two months for a total of $1,750. Okay. Take a look at this now. Same client, same monthly management fee. What if you have them for a year? Well that number goes up pretty significantly, right? 75500. What about two years? What about three years? I'm four and five. Look at this number now. I don't go into a client looking at them like I want them for two months or three months or four months because this is peanuts. What I do when I talk to a client is do I have the potential to be working with this client at this point? Because I have a lot of clients that I've worked with for four and five years. So I'm looking at numbers like this who are paying me, you know, basically buying me a car but I show them a great return on investment. Now just switch this up. What if you're working with clients that are a little bit bigger? See how much those numbers go up? That 30,000 becomes $45,000. Just between $500 and a $750 set up management fee. You can play with these numbers. But I don't want you to look at a possibility of a client just because I need the money. It's a $750 set up fee. I'm going to take them for $500 a month and hopefully will happen for three months. You need to look at this as is this a client that could be long term and this could be the potential revenue because this is a monster number compared to this and you need to think of it like that and you're probably like, well, yeah, but it's four or five years down the road. When you're working with a client this long, that client, everything is on autopilot. They're typically not high maintenance clients. You're going to keep on for four or five years, right? Because you don't want to work with them anymore if they're that high maintenance. These are clients that I've worked with for so long that I mean, you know, we just have a when we speak to each other, I know exactly how the conversation is going to go. I know that they're not high maintenance. I know that they want to keep in touch. I've had a hand in their business for four or five years, which helps make them successful. I know, yes, they paid me $45,000, but I know I've made them back 10 or 20 fold this number. So take a look at this calculator, play with it a little bit. You know, maybe you want to start out with small clients, maybe a $500 setup fee, maybe you're at $400 a month. People over three months, you know, you can get $1,700 a revenue off that. But you know, if you keep that client long term, see what that ends up being? No longer is it a $500 fee you're looking at, but $24,000 in revenue. All right. Hope that helps. See you in the next video.

