Introducing Firm Lifetime Value (FLV): The Ultimate Metric

Most KPIs are meaningless.

But only one that your customers really care about.

Its 100% outcomes and 0% ego. Its called...

Firm Lifetime Value (FLV).

If Customer Lifetime Value brings profit, Firm Lifetime Value brings transformations.

As accounting professionals, we tend to measure our relationships with clients mostly by revenues, billable hours, and services sold.

However, there is another crucial perspective we need to consider more deeply - that of our clients.

This viewpoint is captured in a metric called Firm Lifetime Value (FLV), and understanding how it differs from Client Lifetime Value (CLV) can transform the way we serve our clients.

I came across the term FLV in Ron Baker 's book Time's Up (definitely read that if you haven't already).

It's a mindset shift that I've been through myself and wanted to share from my own perspective.

Thanks to Ron, we now have a sticky name for it.

Customer Lifetime Value (CLV) is the total revenue or profit generated by a customer over the entire course of their relationship with your business

In this article, I'll break down 5 key differences between FLV and CLV.

My goal is to show why maximizing FLV, rather than just CLV, should be a priority for firms seeking true transformations.

1. It's All About Perspective

FLV represents the total value a client gains from the relationship, while CLV shows the revenue a firm earns.

FLV adopts the client mindset, CLV the firm mindset.

It's a subtle shift, but one that changes everything.

If we only focus on CLV, we may not tailor our offerings enough or provide the guidance that brings the most value to clients.

A personal trainer maximizing CLV wants you to keep buying sessions without considering actual weight loss.

A trainer maximizing FLV ensures the workouts and diet advice transform you.

1. Outcomes, Not Revenues

FLV focuses on the tangible outcomes and value received by clients.

Did your advice help them reduce taxes? Make better business decisions? Understand their finances more clearly?

CLV simply tallies up billing hours and services purchased.

It doesn't care if those services brought any real value.

A doctor wants repeat visits and copays (CLV).

A patient wants to get healthy (FLV).

Accountants should aim for the latter.

1. It's About Outcomes, Not Sales

The goal of maximizing FLV is providing the greatest possible outcome to clients.

CLV aims to boost profits for the firm through higher fees and more billable hours.

There's nothing inherently wrong with profits - except when they come at the expense of client outcomes.

A salesman wants commissions.

Customers want solutions that improve their lives.

We should structure our firm around the customer mindset.

1. Customizing is Key

Boosting FLV requires customizing guidance and services for each client's unique needs.

CLV has no such requirement, as long as the bill gets paid.

Taking a cookie-cutter approach may increase CLV but won't deliver transformational FLV.

A shoe company can sell whatever is profitable.

But a good salesperson fits each customer with shoes that meet their individual needs.

1. Loyalty Must Be Earned

High FLV builds loyalty by tailoring offerings to each client.

High CLV doesn't necessarily equal loyalty if the services don't provide value.

Loyalty comes from relationships where clients feel understood, respected and helped.

A bar wants regulars who spend a lot (CLV).

A bartender wants to serve great drinks that keep people coming back (FLV).

The latter builds loyalty.

Focus on Transforming the Client Experience

Maximizing FLV means transforming the client experience through customized guidance, strategic insights and genuine relationships.

The good news? Pursuing high FLV is a win-win when cofocused with CLV.

Clients get greater value, while firms gain loyalty and organic growth.

By adopting the client perspective, we can structure our practices to deliver outcomes that improve their lives and businesses.

Isn't that why we became accountants in the first place?

Measuring Both FLV and CLV

Of course, CLV remains an important metric.

FLV represents the client perspective, CLV the firm.

To run a sustainable, profitable practice, we need to track both.

When FLV and CLV are in harmony or "cofocused" to coin a term, it balances client transformation with business success.

Each quarter and year, look back at the outcomes clients gained from the relationship and how revenues trended for your firm.

Survey clients on the tangible outcomes achieved.

Analyze client retention rates versus profit margins.

Go beyond run-of-the-mill "value pricing" to productized or subscription based pricing to maximize your firm's valuation.

Keeping an eye on both FLV and CLV ensures your practice balances client transformation with business success.

So next time you look at your firm's metrics, consider if you're over indexing on revenues versus client outcomes.

Then set goals for enriching FLV throughout the client experience.

The rewards will be well worth it.

Remember, you're no longer in the accounting business, your in the transformation business.