ABOUT US

Our development agency is committed to providing you the best service.

OUR TEAM

The awesome people behind our brand ... and their life motto.

  • Neila Jovan

    Head Hunter

    I long for the raised voice, the howl of rage or love.

  • Mathew McNalis

    Marketing CEO

    Contented with little, yet wishing for much more.

  • Michael Duo

    Developer

    If anything is worth doing, it's worth overdoing.

OUR SKILLS

We pride ourselves with strong, flexible and top notch skills.

Marketing

Development 90%
Design 80%
Marketing 70%

Websites

Development 90%
Design 80%
Marketing 70%

PR

Development 90%
Design 80%
Marketing 70%

ACHIEVEMENTS

We help our clients integrate, analyze, and use their data to improve their business.

150

GREAT PROJECTS

300

HAPPY CLIENTS

650

COFFEES DRUNK

1568

FACEBOOK LIKES

STRATEGY & CREATIVITY

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PORTFOLIO

We pride ourselves on bringing a fresh perspective and effective marketing to each project.

  • Calculating Customer Lifetime Value

    Calculating Customer Lifetime Value


    One of the biggest challenges that many software companies face when moving to a subscription model is calculating customer lifetime value (CLV). It’s one of the most important metrics for estimating revenue projects so it’s worth taking the time to calculate. If you calculate it correctly, customer lifetime value will give you insight into revenue cycles and allow you to adjust your business plan accordingly.

    Importance of Customer Lifetime Value      


    When customer lifetime value is calculated correctly, it will give you insight into how much your customers are spending now and how much they will spend over a given time frame. Using customer lifetime value to counter evaluate against your marketing spending will allow you to make more informed decisions. It’s more feasible to retain current customers over the long run than it is obtain new ones. Instead of focusing on your AOVs or yearly revenue metrics, customer lifetime value will translate a one-time $40 sale into the opportunity of incurring thousands of dollars over the customer’s lifetime, which helps put customer’s value into perspective.

    Measuring Customer Lifetime Value


    There are several ways to measure your customer lifetime value that pull in added layers of complexity.

    Quick Formula:


    1. Start by using a simple formula to get a snapshot figure that’s great for gathering a preliminary understanding of your customer lifetime value.
    CLV-1


    2. To get a sense of what your customers’ average lifetime with your business is, use your churn rate:
    CLV-Average-Lifetime

    The drawback to both sets of these formulas is that they do not take time valuation into account and they assume that AOV, the number of transactions, retention, and churn rates are constant over the customer’s lifetime.


    3. To assess yearly churn rate’s impact on customer lifetime value use this formula:
    CLV-Recurring-Revenue

    Once you’ve accounted for your customer lifetime value, try plugging in different churn rates to see how this impacts the outcome. Estimating the impact of different churn rates while keeping recurring revenue constant can help indicate where future churn rate objectives should range.

     

    More Realistic Calculations


    In order to get a more accurate estimation of future cash flows, calculate them by incorporating a discount (interest) rate, which is accomplished by using your company’s WACC rate (weighted average cost of capital). You can get an even more accurate estimation if you segment your WACC rates by product type (i.e. traditional download, subscription or SaaS).
    CLV-Monthly-recurring-revenue

    The most accurate customer lifetime value calculation for subscriptions involves discounting future cash flows using churn and WACC rates and subtracting your cost of service rate (i.e. overhead costs, hosting, maintenance, hardware, licensing etc.).
    CLV-COS-Churn-WACC-11

    Segment Your Customer Base To Understand Their Acquisition Costs


    Once you’ve gathered an understanding around your company’s customer lifetime value rates, try and segment your customers to break them down by their corresponding acquisition costs. This will show you how valuable it is to acquire a customer and retain their business over a longer period of time.

    Comparing a long-term customer to a short-term customer will help justify whether to build out customer acquisition strategies or procure more resources. Segment your customers by traditional downloadable, order + upsell/cross sell, subscription, and SaaS. This analysis can be applied to different acquisition channels (i.e. customer arrived to your website through an ad, organic search, backlink etc.) to get an idea of how valuable each of these dimensions are.

    Here’s an example similar to Avanish Kaushik’s blog (a leading industry expert):

     Subscription – Top end CustomerSubscription – Mid range Customer
    Estimated Life Expectancy52
    Orders per year42
    AOV$60$80
    Revenue Year 1$240$160
    Revenue Year 2$240$160
    Revenue Year 3$240-
    Revenue Year 4$240-
    Revenue Year 5$240-
    Lifetime Revenue$1,200$320
    Gross Profit Margin10%10%
    Gross Profit$120$32
    Acquisition Cost$10$3
    Net Profit$110$29


    This example highlights the importance of investing in your top end customers and shows the value in building out your customer acquisition strategy to attract premium customers that will generate recurring revenue throughout their life expectancy. This breakdown also emphasizes how lucrative it can be to provide exceptional service and technical support in order to maximize your customer retention rate and increase your customer’s life expectancy.


    Try calculating your customer lifetime value with a few of the formulas to get an idea of how variables affect the outcome. Keep in mind that the more variables involved in the formula, the more accurate your calculated customer lifetime value will be. Calculating your customer lifetime value will provide a holistic overview of the expected future revenues based on current sales. It will also help differentiate premium customers from average customers, which will help you capitalize on their lifetime value as customers continue to demand software services to maintain their computers.


    – Jason

    Jason Kiwaluk
    Director of Ideation
  • WHAT WE DO

    We've been developing corporate tailored services for clients for 30 years.

    CONTACT US

    For enquiries you can contact us in several different ways. Contact details are below.

    yowasuphomeboy

    • Street :Road Street 00
    • Person :Person
    • Phone :+045 123 755 755
    • Country :POLAND
    • Email :contact@heaven.com

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