How it works
A simple version: take the average monthly gross profit from an account and multiply it by the average number of months accounts stay active. Keep it tied to profit, not revenue, because trucks, labor, and disposal eat into revenue.
Example
Say a residential customer pays $30 a month, and after disposal, fuel, labor, and truck costs you keep $10 of it. If accounts stay about 4 years (48 months), lifetime gross profit is $480. A one-time roll-off customer might be worth $150 on a single job, unless they are a contractor who orders ten more times. These numbers are illustrative; use your own data.
Why it matters for your business
Lifetime value changes how you spend on marketing. If a recurring commercial account is worth thousands over its life, paying more to win it makes sense. If a one-off junk removal job is worth one margin, the acquisition limit is lower.
Use it to:
- Set a ceiling on cost per lead and cost per booked customer
- Decide which segments to target: contractors, property managers, HOAs, restaurants, or homeowners
- Value retention work, since keeping a customer longer raises lifetime value without extra ad spend
- Compare channels by the quality of customers they bring in, not just volume
You need data to do this. Your CRM should record customer source, start date, services, revenue, and cancellation date. Connected billing data from a tool like QuickBooks lets you compute margin and tenure by customer group. Without that, lifetime value is a guess.
Common questions
Is revenue-based lifetime value okay?
It is a start, but it overstates value if margins vary. Profit is more useful.
Should I count referrals?
You can track them separately. Satisfied long-term customers often refer neighbors, but only count referrals you can document.
How often should I recalculate?
When pricing, retention, or costs change meaningfully. A quarterly review is common.