What is lifetime revenue?
Lifetime revenue refers to the total amount of money a business can earn from a customer over the duration of their relationship. It’s a way for you to measure how valuable a customer or partner is over the long term, not just at the point of your initial sale.
To calculate lifetime revenue, simply multiply the average revenue per sale by the number of repeat transactions, and then by the average customer lifespan. For example, let’s say you’re a video software company selling a subscription service at $100 per month. If the average customer stays with you for two years (24 months), the potential lifetime revenue from that customer would be $100 x 24 = $2400.
Lifetime revenue calculation = (Average revenue per sale) x (Average customer transactions)
In the context of channel partnerships, lifetime revenue can be a key metric that helps you understand the long-term financial value each partner brings to your business, how resources and incentives might be allocated to different partners based on their lifetime revenue, and your potential return on investment from partner training, support, and acquisition efforts.
Focusing on lifetime revenue encourages a longer-term perspective in your partnerships. This can lead to stronger relationships and, ultimately, more sustainable growth for your business.