How To Calculate Lifetime Value in HubSpot | Arithmix
Learn how to calculate the lifetime value of your customers in HubSpot with this comprehensive guide. Discover the key metrics and formulas needed to accurately measure the value of your customer base and make informed business decisions.
Calculating lifetime value is an essential part of any business strategy. It helps you understand the long-term value of each customer and how much revenue they can generate for your business over time. In this article, we will discuss what lifetime value is, when it is valuable to calculate it, and how to calculate it.
What Is Lifetime Value?
Lifetime value is the total amount of revenue a customer generates for your business over the course of their relationship with you. This includes all the purchases they make, as well as any recurring revenue they generate, such as subscriptions or service fees. By calculating lifetime value, you can determine the profitability of each customer and make informed decisions about how to allocate your resources.
For example, if you run a subscription-based business, knowing the lifetime value of your customers can help you determine how much you can afford to spend on customer acquisition. If the lifetime value of a customer is $500, you may be willing to spend up to $100 to acquire them, knowing that you will make a profit in the long run.
When Is It Valuable To Calculate Lifetime Value?
Calculating lifetime value is valuable in any business where you have repeat customers or recurring revenue. This includes subscription-based businesses, service-based businesses, and e-commerce businesses. By understanding the lifetime value of your customers, you can make informed decisions about how to allocate your resources, such as marketing and customer service.
Calculating lifetime value is also valuable when you are trying to identify your most valuable customers. By identifying your most valuable customers, you can focus your efforts on retaining them and providing them with the best possible experience.
How To Calculate Lifetime Value
Calculating lifetime value can be a complex process, but there are several methods you can use. One common method is to take the average purchase value and multiply it by the number of purchases a customer makes in a year. You can then multiply this number by the average number of years a customer stays with your business.
For example, if the average purchase value is $50, and a customer makes 10 purchases a year, the annual revenue generated by that customer is $500. If the average customer stays with your business for five years, the lifetime value of that customer is $2,500.
Another method is to calculate the customer's contribution margin, which is the revenue generated by the customer minus the cost of acquiring and servicing that customer. This method takes into account the profitability of each customer and can help you identify your most valuable customers.
Regardless of the method you use, calculating lifetime value is an essential part of any business strategy. By understanding the long-term value of each customer, you can make informed decisions about how to allocate your resources and provide the best possible experience for your customers.
How Do You Calculate Lifetime Value in HubSpot
HubSpot itself isn't naturally geared towards letting you calculate complex metrics like Lifetime Value. As an alternative, teams typically use products like Arithmix to import data from HubSpot and build out dashboards.
What is Arithmix?
Arithmix is the next generation spreadsheet - a collaborative, web-based platform for working with numbers you'll powerful yet easy to use. With Arithmix you can import data from systems like HubSpot, combine it with data from other systems, and create calculations like Lifetime Value.
In Arithmix, data is organized into Tables and referenced by name, not by cell location like a spreadsheet, simplifying calculation creation. Data and calculations can be shared with others and re-used like building blocks, vastly streamlining analysis, model building, and reporting in a highly scalable and easy to maintain platform. Data can be edited, categorized (by dimensions) and freely pivoted. Calculations are automatically copied across a dimension - eliminating copy and paste of formulas.
Arithmix is fully collaborative, giving your entire team access to your numbers and the ability to work together seamlessly.
Calculating Lifetime Value in Arithmix
Calculating metrics like Lifetime Value is simple in Arithmix. Once you've created your free account, you'll be able to import your HubSpot data, and use it to create natural language formulas for metrics like Lifetime Value.
Arithmix is designed to give you the power to build any calculations you want on top of your HubSpot data, while also being easy to use and collaborate on. You can share your dashboards with users inside and outside of your organisation, making it easy to empower your whole team.Use Arithmix free