The lifetime value of your interior design clients is an important metric (measure) of your interior design business.  Why? It helps you create budgets for one.

If your average client does $30,000 of revenue with you, and the profit for that client is $6,000 after the cost of materials and overhead for your business, but before your salary, how many clients do you want to serve in a year?

The average designer earns $40,000 per year, so that means your revenue, so if you divide $6,000 into your earnings, you need about seven clients to make $40,000.  Your gross revenue would be $210,000.

This is a simple approach to determine a basic metric for your business, but it helps to determine what you need to do in 2010.  If your average closing rate is 10% of all prospects you meet, then you will need to meet with 10 prospects to get one client.  If you need seven clients next year, you need to meet with 70 prospects.  Divide that by 12 and you need to meet with about 6 prospects per month.

Do you want to make more money?  Here are your choices:

• Sell more clients
• Close a higher percentage of prospects
• Do more business with current clients
• Sell more often
• Increase the profit on your transactions

If you do just a little better on each one of these areas, you’ll increase your profits and income dramatically.  Does that help to understand how important the lifetime value is?  Be sure and share your thoughts.  We’ll be covering this in more detail in our December and January Monthly Mentor Classes.

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