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Exponential Entrepreneurs

The 97  ›  Assessment and reflection

Your Life-Time Value

The point

Apply a client lifetime value formula to your own life.

Jay Abraham · Redondo Beach 2023 — Day 1, Session 2 Cued to 56:31 3 min 25 sec loading…

Why it matters

You already know how to do this. You have never pointed it at yourself. A client's worth is not the next transaction, it is the whole relationship, and so is an hour of your attention, a person in your address book, and the years you have left in this business. Start with the hour. What does it cost to buy one back, $40 or $200 to somebody who can do the task? And what does that hour return when you spend it on the work only you can do: a partnership opened, a price raised, a product decided? Most owners sell their best hours at the price of their worst and never run the subtraction. Then a relationship. What is one person in your network worth across ten years, counting referrals, introductions and the deals that only happened because they picked up? Almost nobody has a figure, so contact gets decided by the inbox. Then the biggest number. Your remaining years at the trajectory you are on, against the trajectory of a business you deliberately changed. That gap is what this year's decisions are worth, and it dwarfs any deal you will argue about. All three end in the same move. Once you know what an hour, a relationship or a decade is worth, you know the most you can justify investing to acquire one. That is your own allowable cost, and the owner who has it outlasts the one still guessing.

The mistake almost everyone makes

Running the numbers on your customers and never on yourself. You will defend a client's lifetime value in a meeting and then give away the most valuable hour of your week to a task you could have bought for $30.

The test: Name what an hour of your attention is worth. Then look at yesterday and count the hours you spent on work somebody else could have done for $30.

Where it shows up — 8 worked examples

WhoWhat happened
Any internal meetingTwelve people for an hour is a bill nobody writes, and pricing that hour once is what ends half the standing meetings.
Bright Family Eye Care, Lawrenceburg, Indiana (Dr. Samantha Hornberger)Sold a paid imaging screening inside exams already on the book, so the same clinical hour returns $550 rather than $378.
Guilford Family Counseling, Santa Rosa, California (Uriah Guilford)Bought back the owner's admin hours with automated scheduling and billing; the solo therapist's caseload rose a fifth and became a group practice.
Pinboard (Maciej Cegłowski)Ran a bookmarking service alone for a decade at $117,000 to $259,000 a year, refusing the funded trajectory he did not want.
IKEUCHI ORGANIC (Imabari, Ehime, Japan)Lost the customer carrying seventy percent of sales in 2003 and spent the next twenty years rebuilding on a brand then under one percent.
Kyohokai (Toyota's supplier association)One membership puts a supplier in a room where about 200 firms teach each other methods it would take decades to develop alone.
Gripple LimitedRefuses its own current trajectory by rule: a quarter of each year's turnover must come from products under five years old.
Justin Welsh (solo course business)Runs a course business alone, no employees and one part-time assistant, past $2 million a year, every hour of it his own.

What it solves

The words a business owner uses for this before anybody has told them the name of it. If one of these is a sentence you have said out loud, this is your strategy.

  • We price by the next sale“I can tell you what a client is worth over five years and I have never asked what an hour of mine is worth.”The same lifetime arithmetic pointed at your own attention, so the hour you keep giving away gets a price on it before you give it away again.
  • Nobody can state the numbers“I do work most days that somebody else could have done for a fraction of what my time is supposed to be worth.”What it costs to buy an hour back set against what that hour returns, which is the subtraction almost no owner has ever run on themselves.
  • We worked it out once“The people I stay in touch with are the ones who wrote to me most recently, not the ones worth the most to me.”A ten-year figure on a single relationship, so who you keep in contact with stops being decided by whatever arrived in your inbox this morning.
  • Our budget is a guess“What I spend on myself, on training, advisors and help at home, is whatever feels reasonable rather than anything I worked out.”Allowable cost derived for yourself, so what you invest in an hour, a capability or a relationship stops being a comfort level and starts being a figure.
  • We are outbid by worse businesses“I have been here long enough to know exactly how the next ten years go if nothing changes.”Your remaining years priced at the trajectory you are on against a changed one, which is the largest number in the exercise and the one nobody runs.
  • The advisor's version“I advise clients on what their time and their relationships are worth and I have never done the arithmetic on my own.”The figures for your own hour, your own network and your own decade, which is the credential the advice was always resting on.

The challenge

Price your own hour, then your own decade.

Write three figures. What it costs to buy back one hour of your week, and what that hour returns when you spend it on work only you can do. What one relationship in your network has produced over the last five years, doubled for the next five. And what your current trajectory pays you across your remaining years in this business, against one you would have to change something to reach. Then set your allowable cost: the most you can justify investing to acquire an hour, a relationship or that change.

How you will know it is done An hour priced both ways, one relationship valued across a decade, two trajectories compared, and the allowable cost written for each.

The AI layer · second pass

Once this is working, here is what to multiply

Improve the system first. Then multiply it. This panel is the second run at the strategy above, and it is deliberately useless until the first run is done.

Before you point anything at this You have calculated lifetime value and cost of acquisition once, manually, on real figures.
What it multiplies Recomputing both continuously by segment, so allowable acquisition cost stops being an annual guess and becomes a live number that different channels can be judged against.
The trap A confident number built on a definition nobody checked. The arithmetic is trivial; the judgement about what counts as a client and what counts as a cost is not, and that judgement has to be yours before it is automated.