Episode 140: The Lifetime Value of Your Customers

Episode 140: The Lifetime Value of Your Customers

Announcer:
Grow your cleaning business. Make more money, have more time. This is the profit Cleaners podcast with your hosts, Brandon Condrey and Brandon Schoen.

Brandon Schoen:
Hey, everybody. Welcome back to another episode of the Profit Cleaners podcast. The only place where you can learn from the top 1% of cleaning business owners from around the world to take it to the next level and win. I'm your host, Brandon Shane, and I'm joined by my co host, Brandon Condrey.

Looking sharp today, Brandon. Everything going good over there? Yep. Got a haircut yesterday. I still don't have a barber in Los Alamos. I drive all the way back to Albuquerque to get haircuts, but I'm down there enough, it works out. Yeah, same here, man. You know, these small towns, they don't have everything you need, but they definitely are fun once you get your business ramped up. So, something you guys can look forward to.

And actually, we're gonna be talking about some amazing upside potential today. We're gonna be talking all about on this episode, guys, the lifetime value of your customers, why this is so important, and why you should really be looking at the big picture here, which is all the things we always talk about here on the podcast and the show, customer experience. Why you want to build the systems the right way, why you want to put the foundational pieces in place and do the hard work up front, because this is what's possible, guys.

So we want to share with you guys today on the show some really cool numbers, which are lifetime value numbers of customers we had from the very, very beginning. We're going to bust out our spreadsheet we had our team make, which was just actually part of our spring referral campaign we're doing. We're just looking at who are our most raving fan customers, the ones that have been with us the longest.

What has that generated us? And ultimately, yeah, what's a cleaning customer worth? Why? Why does that matter? And why should you guys care? So let's dive into it, Brandon, and share lifetime value of a customer in the cleaning business. Let's jump into it. Yeah, so, like, we've had this data the whole time, but it's really interesting to see it spelled out so succinctly. So what we're looking at, which I don't think we're going to share this with the podcast listeners, but describe it to you because there's personal identifying information on your butt.

We have a list of 100 of our sort of top customers. So how long have they been with the company, how much they spent, whether they're weekly or bi weekly? What's their annual revenue? There's more than one way to skin a cat. So there's more than one way to get customers for a cleaning company. There's more than one way to keep customers for a cleaning company. And I remember we often get a lot of pushback when some of you guys will ask us, what's your referral policy?

I'm thinking about of offering 10%. We started with 10%. No one cares about 10%. 10% of a $200 service is $20. That's not enough to get someone motivated to, like, send a bunch of text messages to their friends. But what we found out through some experimentation, our current referral policy is, if you refer us a recurring customer, we'll give you the next clean for free. And so people, like, get shocked about that.

Like, you're gonna give away the service. Like, that's $300 that we could be making. I'm like, yes, but that is shit. Short term thinking. By us giving away a free clean, we are making the customer who referred us the business very happy, and then it gives us a chance to get in the door with someone else. And so we're trying to tell you, like, lifetime value of a customer so far.

So, like, the lifetime value of a customer up to now. So we've been in business since 2017. Unfortunately, there's no one on this list from 2017, which makes me a little bit sad. But reality is reality. Yeah. We were only in business for six months of 2018. But, like, the customer on this list that's been with us the longest, signed up in May of 2018. So they've been with us for six years, 21, 86 days.

And over that time period, that particular customer spent $27,000 with us. So anytime we're trying to tell you what the lifetime value of a customer is like, I'm going to give you the numbers right now. So seven years in, we've got customers that spent $27,000, and that's kind of middle of the road. Like, if I sort this column by the most, we have one customer, one that's over 50 grand, $52,000 in cleaning in four years.

They came on in 2020. So now, look, that has a very big house. I remember this customer, and he spends roughly $16,000 every year with us, which is not your average cleaning customer. I want to be upfront with you guys, but still, when you say yes to someone, this guy has a really big house and a small house on property, and we customized a schedule for him where.

Okay, we're going to come every week to this big house, and we're going to clean the other house every other week. So that kind of gets a little bit weird on the scheduling, a little bit weird on the pricing, but the reward is he spent $53,000 on house cleaning over four years. And the better part about this is that we never hear from that guy. Price increase, never pushes back scheduling, never cancels complaints, doesn't complain.

So this is what we're trying to get you guys towards. We want you to get more of this kind of customer. And most of the stuff that we talked about here on the podcast, but also in our course, is to try and get you to this level to get these kind of customers that love your service. Don't push back. Don't complain. Spend 50 grand. If I could get more of them, it'd be great.

Yeah, absolutely, man. That's huge. And this is really, guys, like, an exercise in shifting your mindset from, like, what Brandon said, thinking short term to thinking long term, from thinking of a fixed mindset. This is all I can get to a growth mindset. What is the possible? Like, how could we actually juice the most out of this customer and make the most amazing experience? So they want to stay with us long term and become a raving fan.

And this is the shift in that mindset, is seeing that customer, when you're talking to these clients or you're giving out a referral, it's not just dollar 300. It's not just that first clean. It's one after the other, after the other years and years and years of service. And so, just to give you guys a perspective of what we normally consider a lifetime value of a cleaning customer is about $6,000.

Right. Brandon, for your average biweekly, that's the yearly. That's yearly. Right. So this isn't lifetime even, but that's normally what we're even talking about, because you don't always know if people are gonna go past a year. But we're just showing you guys right now real data that shows if you guys are doing this right, if you're building the business right, you've got the proper systems in place, culture, the proper experience.

This is what's possible. It's not even $6,000. It's 50,000. It's maybe $100,000. I don't know. Like, there's bound to be people. If we kept this business going, which we are, these people will likely still be with us in five years. Like, a lot of these customers. So that's why it's so important, guys, to really file this in. As long as we're moving forward on the customer experience side of stuff, we're trying to constantly improve.

We're not doing drastic shifts. We're just trying to keep everybody happy and make some tweaks here and there. As long as we keep doing that, none of these customers have any reason to cancel. We're keeping them happy. They've been around for a while. They like what we're the product that we're delivering, and as long as we keep going, there's no reason for them to bail. So things that could cause those kind of tectonic shifts are huge price increases.

We did some big ones during COVID and we still have a lot of these customers. But ever since then, we've been on this schedule that we try to get you guys on. I think the episode right before this one was about pricing, but you want to do a small price increase once a year, every 18 months, sort of keep up with inflation, and then you're in a routine.

You don't want to skip it for five years and then be like, hey, we're raising prices by 30%. Like, after you have customers that have been paying the same thing for that long, that's going to be a big shift in their budget. So as long as you're keeping pace with the realities of the cost of doing business, you'll stay in their budget. Like, okay, we raised it by 3% this year.

Great. That's not a big deal. That's fine. But, like, these numbers that we're looking at, here's some averages for you. So right now, our average invoice after the price increase we just did in April is $240 per service. So if you multiply that by biweekly, you get $6,240 per customer. The average on this list is 4454 over a year. That's what the average of our best, oldest customers is spending.

And the reason that's different is some of the numbers that are figuring in are pricing from 2018, we've obviously raised prices several times. So in 2018, what would have been 240 now might have been 175, 75 back then. So there, even though that average is lower than what our average is right now, we're taking to account six, seven years of data. So the average on here per year per customer.

4454. The average monthly revenue per customer. $371. So if that was bi weekly, then you're looking at $170 in invoice. And then the length of days with the company 1765. That's what these average customers are. So I think that's pretty cool. Man, we should have done this before. I've never looked at the data like this but our oldest customer is 21. 86 days. And the young, the longest one on this list is 1112 days.

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breezyblue. That's profitcleaners.com breezyblue. And this is just like a very small snapshot of when we have thousands of customers. But this is only the top 100 customers that have been with us the longest. And just going back to the customer lifetime value, like we use this term a lot in the marketing world because it's very important to know how much is that customer worth so that, you know, how much can I spend to acquire that customer?

Right? When you actually know these numbers and you're like, okay, it's $6,000 for the year. Now, when you go back to your lead acquisition costs and you know, if you're doing it yourself and you're spending a lot of money, even if you have no idea what you're doing and you're still spending a tremendous amount of leads, even if you're spending $100, $200 on the lead to convert maybe even more than that.

But you look at the bigger picture value of that customer, it's still a drop in the bucket, right? So I think it just makes you understand, like wow, like actually it's a very small price to pay to acquire this huge customer on the other side, what the revenue they could actually generate. And when you actually get into optimizing your marketing, this is what we work a lot with on our students, with our students on your sales and your marketing systems to bring those costs down significantly.

So you're spending ten or $20 to generate the lead and maybe more on the back end, maybe close to 50 or 100 for the total cost of lead. But still that's a significant, it's very low in comparison to the overall revenue you're going to generate. So again, if you guys are taking notes, customer lifetime value is average dollar amount of purchase. So like Brandon said, 100, $5200, a clean whatever yours is, times the number of customer purchases per year, monthly, bi weekly, or weekly.

So figure that into it and then times the average length of the customer relationship in years equals your customer lifetime value. So we're just showing you guys, again, these people have been with us for years and years. Although, you know, a lot of times when we're talking to students and stuff, a lot of times the issue is maybe not even getting customers, but it's keeping customers right. So that's why it's so important to create the experience, create a positive impact, and always be over delivering, because this is what it results in, is having your best customers.

Like Brandon said, we don't even hear from these people. We don't hear complaints. They've been with us, they never push back. This is when you get the best of the best customers. This is what they can possibly generate. 50 grand on some of our best customers over many, many years. But I think of cleaning businesses that have been in business for. We've been in business for seven years, right?

Or eight years, 2017, it'll be seven years this July. So if you actually have a big vision for your business and you're planning on being envisioned in business for ten years, for 20 years, just imagine what that could be like. We're talking seven years here, people that have been with us for five years. So in a very short amount of time, each customer can generate a massive amount of revenue.

You're looking at the big picture. So that's huge, man. This is really look at too for me. So the other thing here with this list is the average lifetime value of this customer list. This is 100 people. So 100 people that have been with us the longest, spent the most. The average lifetime value on this list is $20,747. But that's today, like next year there, all of those numbers will have gone up by, you know, between four and six, or $10,000, depending on how often they're getting cleaned.

So this list, average lifetime value, almost $21,000. And these hundred people over six years have spent $2 million combined on cleaning. So a hundred people. There's, you know, the. I'm losing my mind here. Wired was founded by a dude named Kevin Kelly. I think he wrote a book called 1000 true Fans. And so whatever you're doing, whatever you want to do, if you can get 1000 people to really like it, your set is his sort of concept.

We're looking at a snippet of 100. And that's $2 million. If we multiplied it by ten, if we had a thousand people that had been with us for that long, it's $20 million. So the numbers on service industries like this, recurring services, like we've joked before, that cleaning is like Netflix for cleanliness. So Netflix is like $20 a month. This is 400, $8480 a month. But what you get back is time.

Those people that spent $50,000 with us, they're not wringing their hands about having spent $50,000 on cleaning. They used the time that we put into their house, keeping it clean for them to go do other things, like maybe make more money at different jobs instead of cleaning their own house. So it doesn't take a lot to get there. We're talking about 100 people that spent $2 million. I think that's pretty impressive.

The other thing I think is what can you do with a thousand people? What can you do with 500 people? We've had goals in the past where to be a $40 million cleaning company, which sounds insane, but we're on our way there. Like we're a 10th of the way there and we're getting there now with like 800 recurring customers. So picture what you can do with 2000 thousand recurring customers.

5000 recurring customers. We operate in Albuquerque, Santa Fe, Los Alamos, Albuquerque metro area is just shy of a million people. I think Santa Fe is 100,000 people maybe. And Los Alamos is teeny tiny, 14,000 people. So picture getting 5000 people. When you're talking about a market that is 1.1 million, 1.2 million people, that is totally and absolutely achievable. It is not like pie in the sky stuff to be able to do it.

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And this is key, basically just also to give you guys some extra homework, some ways to increase your customer lifetime value. And these are things that we're constantly working on that you want to consider. But it's, number one, you can increase average purchase value. So this is doing a price increase, right? We just did one in April. We do this about once a year. You can also promote other products, you know, do other things to add more value, which is a great way to do it.

Another way to do that is increase the average purchase frequency rate. So instead of them being a monthly customer, show them, hey, if you move to bi weekly or weekly, you're going to save some money, incentivize them, right? So increase the frequency. Number three would be increase the value of the products and the services sold, make it more valuable, add more things that you do, add more details, add more job notes, add more things that you do that make people say, wow, everyone else charges for that and you guys just do it.

That's what we do. And people are always surprised that's over delivered. And then number four would be increase the average customer life. This is going back to customer experience when people are always feeling like you're over delivering. Even if you make a mistake, even if you do a price increase, whatever happens, they're still going to be feeling compelled to reciprocate. Hey, I want to be a loyal fan.

I want to be a customer of yours because you guys are always there. You're always there for me. You're always helping out. So this is why we go back to the customer experience, guys. If you have these things dialed in, you have a high quality, consistent clean that is duplicatable amongst your team. So it's the same result every time. And you couple that with a great experience, making people feel great, saying wow, surprising them with they're overwhelmed with joy and they can only say, wow, this is amazing.

That's a recipe for long term customer satisfaction, a long customer lifespan. And I think this is again, going back to why it's so important to do the hard work, build the systems, build your foundation, put the proper training in place, hire the right people, be patient, find the right people, and just continuing to be innovating your marketing and sales systems. Everything else that makes this business go, because that all trickles down to adding more value, making the experience better, making people want to stay on long, and this is the result of it.

All these numbers we're sharing with you guys today is a result of that. And this is just proof in the pudding of why you should be doing that. And there's other ways to grow this business. There's a lot of shiny objects out there. There's a lot of people. I personally think it's a shiny object to grow your business with contractors, but it seems easier. It seems like, oh, I don't have to do the hard work, right.

But a lot of the times when we talk to people doing that business model, they don't have these long term customer values because people drop off after the first claim. That's an easy come, easy go situation. So if it feels like it's easy with contractors, there's a reason and it will bite you. Right? That's a great example of why doing the hard work, doing what most people are unwilling to do is worth it, because it looks easy on the front end.

But if it's easy, if there's a lower barrier to entry, there's definitely going to be more variables, there's going to be more issues. So if you can do the things that are harder, this is just like anything in life, if you do the hard work. This is why being an entrepreneur is so awesome. If you do the hard work, you're going to be able to create a life that most people won't have.

Because most people are not willing to do that. They're not willing to sacrifice and be uncomfortable. Go through the pain of doing so. Same with building your business. When you do it the right way, this is what can happen, guys. Lifetime value of your customers goes through the roof. The revenues are there. You don't have to be constantly looking for new customers because you have raving fans. You have amazing customers that love you.

And the whole reason we came up with this list, guys, is because this is just an idea for you. Take this tip and run with it. But your best recurring customers, our future recurring customers, are going to come from your existing recurring customers. So that's why we started building this list out in the first place, was for a marketing campaign. Maybe we'll do another episode on that in the future and share how we did that.

But reach out to your best fans, your best raving fan customers first to get more recurring customers, because those people already love you. So these people, by being with us for a long period of time, have demonstrated that they love our business. They're a raving fan. So they're going to be the most likely ones to be open to referring us new business. Right. And be happy to do that.

So anyways, man, that was a fun episode today. I'm really glad we covered those numbers. And I don't know if there's anything you want to add more to that, Brandon, but that was fun looking at lifetime value, so. Yeah, no, I mean, I think, like, for us, like, the you rattled off, like, how to increase lifetime value. So, for us, we're trying to increase the average customer relationship.

So we're trying to never lose these people. We want them to be on board for a long time. And so we're doing that through a number of ways. We have three and a half full time positions that are dedicated to just customer experience. That's handling leads and handling customer service. We try and go above and beyond whenever we screw up. We're not telling you that we're perfect out here and so good at cleaning.

That's why everyone stayed here. No, man, we screw up probably all of these cleans to some degree. But the question is how you handle it after you do that. So if they called in with a complaint, if you finger point like, nah, that was you. Your dog walked on the floor. That wasn't us. They left those streaks. They're gonna get so mad at you, and they're gonna cancel right away.

And you can find Google reviews in your local market of cleaning companies doing exactly that. Instead, you want the Google review to be five stars. That said, I called with a complaint, they listened, they were empathetic. They fixed my problem. They gave me a refund, and then they promised they wouldn't do it again, and they didn't. All those kinds of things, even though that seems like this huge burden to overcome mentally, it's not that difficult.

Once you get into the routine of it and you're trying to train this corporate culture into your customer experience, people, so that that's passed down to the customers. Like, Brandon, I don't speak to customers anymore. Like, I recognize a lot of these names on the list because this is when I was doing sales in person. So a lot of these people that are in there from 2018, I've been in those houses.

I remember where they were. But when a customer complaint comes in, they don't dispatch you to the owner's cell phone. I'm not dealing with that anymore. So I. You guys can get to this point, too, where you have someone who likes handling customer service, and they are excelling at it. Without you, the business, you know, the cleaning company owner having to do the nitty gritty day to day stuff, you can do this.

Instead, we're starting a podcast. Like, all these things are only possible because we focused on growing the team and scaling the team and all of that. In the end, when you look back at this data, it's pretty interesting to look at, you know, that we have these customers that have been with us for the average length of time in months is 57 months. So, like, it's just shy of five years is what these top hundred people are doing, which is pretty cool.

So, I mean, I. If we pulled all customer data, like, there's some turnover, obviously, and we have a lot of new customers that come on, we have a lot of cancellations that we try to keep up with, just like every one of you. But when you really find your niche customer, like, when we tell you guys to think about your ideal customer, this is it. This is our ideal customer.

These are people that have single family homes, high income. They want to keep using our service for six years or more. Like, that is what you should be after and keep tweaking the systems internally to get to that goal. Yeah, I love that, man. And just to add to that, too, like, a lot of us are kind of stuck, especially in the beginning when we don't know. We don't know.

We feel like the cleaning has to be perfect. Like Brandon mentioned, we are not perfect. We are all humans. We're all making mistakes. Teams are making mistakes. Which is why it's important to realize why the experience is so important, because people will pay more for a great experience. Even if the product is subpar, it's not the best product. The cleaning wasn't the best. But the way you made them feel, the process, the whole effect of making people say, wow, if you can do that, even if you're still dialing in your cleaning systems, you're still figuring it out.

And even when you do, perfection is the enemy of progress. You're not ever going to be perfect. So don't. Taking imperfect action is better than nothing, right? So constantly be improving the cleaning process, the efficiencies, all that to be profitable, of course. But again, if you guys are still dialing that in, that's fine. If you are able to make people go, wow, this is amazing, make it feel great, make them feel special, make them feel, I listened, I care.

We want to help you solve this problem. This is what's going to take you guys from a one time clean, a couple cleans to a lifetime customer that is with you for years and years and years and years. Because again, if you can just make people feel great about what you're doing, make them part of your mission, make them part of the culture you're doing, like, over delivering.

This is what's going to get you guys to that level of having raving fans for years and years and years. And doesn't mean you have to be the, the most perfect cleaning team or cleaning company with the process perfect. It's get it up to a certain point, always be getting better, have that growth mindset of constant progress. But, yeah, over deliver on everything else. All the other systems we talk about, the experience brings that together, and this is the result and this is why it's so important.

So, yeah, we'll probably do another episode at some point talking more about this, and maybe in the future we'll see how much more the lifetime values have gone up. But I think this is really inspiring, even just for Brandon and I to be like, wow, this is the fruit of our labor of years and years and years ago, even people still being on board. And I thought it was interesting, too.

Maybe the first, I was telling Brandon, maybe we didn't hit our stride in 2017 because, like, all these recurring customers are from 2018. Like our first actual full year in business, which is funny, too. So maybe that's proof in the pudding, too. Like when you're first getting going, working out the kinks, maybe you're making more people mad than you want to because you're figuring it out. But as you hit that stride, you know, six months in, we hit that stride.

We have customers from years ago for that first year, from. From when we hit that stride. And that's when we really started dialing in the experience. The systems, like everything with our teams, the training, more so. So maybe that huge part of it. But, yeah, I just think it's really cool to look back on that and see that data and see why it's worth it, guys, to keep going and to keep your customers happy, right?

To over deliver. Yes. Yep. So we've rambled on about some numbers here, but you guys get to drill the ideas. If you are struggling right now, in the early stages of your cleaning company, there's light at the end of the tunnel. You have probably already signed up your customer that's going to be there for six years and spend $50,000 with you, they're already in your schedule. Your goal now is to keep them happy and continue, you know, delivering excellence and keep it up.

And then, you know, in five years time, we'll have you on the podcast and we can review your lifetime numbers on customers. But it is totally possible. And in the meantime, keep it clean. Thanks for joining us today to get more info, including show notes, updates, trainings, and super cool free stuff. Head over to profitcleaners.com dot. And remember, keep it clean.