Businesses have different models of making money. Some are straightforward, one-time transactional types. When selling widgets, that’s the type of business you’re in. You make the most of your money with that one transaction, and to increase the bottom line, you need to sell more to more people.
Then there are businesses where you make most of your money over time. Businesses that require you to build and maintain a relationship. They become a long time journey for both you and your client. Here, your important metric is your customer’s lifetime value. You should dedicate most of your activities to increasing this number.
Any kind of advisory or service business is particularly suited for this model. (Think financial advisors, GPs, coaches…) How you approach your before, during, and after units will change depending on your business. But the most common mistake I see people from the second group make is to only focus on the initial transactions:
“How many new people did we bring in this time?” or “How much money did we get from them?”
They look at the money they spend in the Before Unit as an expense. And that’s a mistake because when you ignore the long-term journey… you risk leaving millions on the table. (Quite literally!)
Here’s what I mean…
Say, you’re a financial advisor. You are in a position to shepherd your client through their entire life cycle. From getting out of college and landing their first job to their first promotion and mortgage to saving for retirement. You can get a client for life: You become their trusted advisor, someone they go to with their most important life decisions.
So it makes sense to be willing to give up some money at the beginning of this cycle because you know it can grow into something much bigger in the long run. To use a Florida analogy – You should look at it as if you were planting an orange grove 🙂 You are planting trees today but don’t expect them to give you fruit immediately.
You know it will take three to five years before the trees start producing anything meaningful. And that’s fine. Because you have a valuable asset that will yield you profits for the next 20 years. See the difference? Once you start looking at it like somebody investing in a grove, you realize that all the money you put into your Before Unit upfront is not an expense. It’s a capital investment.
What’s more, when you switch from looking at each client individually to looking at them as a group, a cohort: as a grove instead of individual orange trees and plug their lifetime value into the picture. Then, an interesting thing happens:
The little grove you planted at the beginning quickly turns into this abundant million-dollar orange grove, yielding you delicious juicy fruits for years to come.