How To Calculate LTV in Sage 100 | Arithmix
Learn how to calculate the lifetime value (LTV) of your customers in Sage 100 with our step-by-step guide. Increase your profitability and make informed business decisions with this essential metric.
Calculating LTV (Lifetime Value) is an essential metric for any business that wants to understand the value of its customers. It helps you determine how much revenue a customer will bring to your business over their lifetime. In this article, we will discuss what LTV is, when it's valuable to calculate it, and how to calculate it in Sage 100.
What Is LTV?
LTV is a metric that measures the total amount of revenue a customer will generate for your business over their lifetime. It takes into account the customer's purchase history, the frequency of their purchases, and the average value of their purchases. By calculating LTV, you can determine the value of your customer base and make informed decisions about how to allocate your resources.
For example, if you have a customer who spends $100 per month and has been with your business for five years, their LTV would be $6,000. This means that over the course of their relationship with your business, they will generate $6,000 in revenue.
When Is It Valuable To Calculate LTV?
Calculating LTV is valuable for businesses of all sizes and industries. It helps you understand the value of your customers and make informed decisions about how to allocate your resources. Here are some scenarios where calculating LTV is particularly valuable:
- When you're trying to determine the ROI of your marketing campaigns
- When you're deciding how much to spend on customer acquisition
- When you're trying to identify your most valuable customers
- When you're trying to forecast future revenue
How to Calculate LTV in Sage 100
Calculating LTV in Sage 100 is a straightforward process. Here are the steps:
- Calculate the average purchase value: Divide your total revenue by the number of purchases made by your customers.
- Calculate the average purchase frequency: Divide the total number of purchases by the number of unique customers.
- Calculate the customer value: Multiply the average purchase value by the average purchase frequency.
- Calculate the average customer lifespan: Determine the average length of time a customer stays with your business.
- Calculate LTV: Multiply the customer value by the average customer lifespan.
For example, let's say your business has generated $100,000 in revenue from 1,000 purchases made by 500 unique customers. The average purchase value would be $100 ($100,000 / 1,000), and the average purchase frequency would be two (1,000 / 500). The customer value would be $200 ($100 x 2), and the average customer lifespan would be three years. Therefore, the LTV would be $600 ($200 x 3).
By calculating LTV in Sage 100, you can gain valuable insights into the value of your customer base and make informed decisions about how to grow your business.
How Do You Calculate LTV in Sage 100
Sage 100 itself isn’t naturally geared towards letting you calculate complex metrics like LTV. As an alternative, teams typically use products like Arithmix to import data from Sage 100 and build out dashboards.
What is Arithmix?
Arithmix is the next generation spreadsheet - a collaborative, web-based platform for working with numbers that’s powerful yet easy to use. With Arithmix you can import data from systems like Sage 100, combine it with data from other systems, and create calculations like LTV.
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 LTV in Arithmix
Calculating metrics like LTV is simple in Arithmix. Once you've created your free account, you’ll be able to import your Sage 100 data, and use it to create natural language formulas for metrics like LTV.
Arithmix is designed to give you the power to build any calculations you want on top of your Sage 100 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