One of the things you need to do when looking at the financial viability of any business is you want to analyze a couple of numbers.
The first number is you want to understand what the lifetime value of a customer is.
So in a typical network marketing business, the lifetime value is how much revenue you think you can generate from a particular customer.
And that revenue can be from an initial purchase, from ongoing purchases, from future purchases, from any type of product sales that you think a typical customer could do. And that could be over a period of one year, two years. In the business I'm involved in, it could be a lifetime. And lifetime, it'd be as long as you want to be in the business. So that's the lifetime value of a customer.
And that cost you want to figure out is the customer acquisition cost. That is how much you think it's going to cost to acquire a customer. And those costs are generally related to people costs and marketing advertising costs. So how much money do you think it's going to cost you to go out and advertise either on Facebook, on Google Ads or just in general on any other platform.
There are a number of platforms out there that are geared towards generating leads for you to acquire customers.
What about events? Are you going to attend events? What about follow-ups? If you've got an assistant in place that's going to help you or yourself who's going to do some of the follow-ups, right?
So there are people costs which sometimes people don't take into account. But if you're spending all this time searching for new clients or two for a new people, you have to take that into account because you can't scale, if you, as an individual spending an hour or two or three hours trying to acquire a customer, and if you value your time at a certain dollar value, then that's going to contribute to your customer acquisition costs.
So a typical scenario or typical calculation you can do when you're looking at building your business is how much is your customer acquisition costs, and what's your lifetime value of a customer.
And you'd look at the difference between those two, if there's a significant difference then maybe you have a business model, because there's also overhead or what's called fixed costs that you have to take into account.
So really what you're doing is you're gathering all the information to do a proper business, a financial pro forma. If you like what you heard and you want more information and how to scale fast, go to jimpellerin.com.