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A homeowner who buys a roof from you might later buy gutters, windows, or siding, call you for a repair, and recommend you to two neighbors. That stream of future value — customer lifetime value, or LTV — is why some contractors can afford to pay more to win a first job than others. It's also an easy number to inflate. Here's how to measure it honestly.
What makes up lifetime value
- The first job — the gross profit from the initial sale.
- Repeat projects — additional work from the same homeowner.
- Service revenue — maintenance plans, inspections, repairs. Especially important in HVAC and plumbing.
- Referrals — new customers who came because this customer recommended you.
Use gross profit for each component, not revenue. LTV built on revenue makes every channel look affordable.
How to measure it from your records
Pull customers from a past period — for example, everyone whose first job was three or more years ago — so there's been time for repeat work and referrals.
- Repeat gross profit per customer = total gross profit from their later jobs ÷ number of customers
- Service gross profit per customer = service plan and repair gross profit ÷ number of customers
- Referral value per customer = gross profit from referred jobs ÷ number of original customers
Add those to first-job gross profit and you have a measured, historical LTV over that window.
If your CRM doesn't track referral sources or link repeat jobs to the original customer, start now. Six months of clean tagging beats years of guessing.
An illustrative example
| Component | Gross profit per customer |
|---|---|
| First job | $5,000 |
| Repeat projects over three years | $1,200 |
| Service and repairs | $400 |
| Referrals | $1,000 |
| Three-year LTV | $7,600 |
In this example, LTV is about 1.5 times the first job's gross profit. That doesn't mean you should spend 1.5 times more to acquire a customer — it means you have some room, provided the repeat and referral behavior holds for new customers too.
Using LTV responsibly
- Separate first-job economics from LTV. A source should ideally pay for itself on the first job. LTV is upside, not the justification for a money-losing channel.
- Measure by source. Customers from referrals may refer more; customers from aggregators may be more price-driven. LTV can differ by channel.
- Discount the future. Gross profit three years from now is worth less than gross profit today, and some of it won't happen.
- Check payback time. If acquisition costs take a year of repeat work to recover, cash flow matters as much as LTV.
Compare LTV with customer acquisition cost, and keep per-source ceilings anchored to break-even cost per lead.
How to raise lifetime value
- Deliver a great first job. Everything else depends on it.
- Offer service plans where your trade supports them.
- Stay in touch with seasonal check-ins, not just sales pitches.
- Ask for referrals at the right moment — see referral vs. paid leads.
- Track every repeat and referral job back to the original customer.
Frequently asked questions
How do you calculate customer lifetime value for a contractor?
Add the gross profit from a customer's first job, later projects, service work, and referred jobs over a set period, using customers old enough to have a meaningful history. Average it across customers.
Should LTV be based on revenue or profit?
Gross profit. Revenue-based LTV overstates what a customer is worth and leads to overspending on acquisition.
Can I use lifetime value to justify expensive leads?
Carefully. Ideally a source pays for itself on the first job, with lifetime value as upside. Use measured, source-specific LTV rather than optimistic estimates.
Which home improvement trades have the highest lifetime value?
Trades with recurring service, like HVAC and plumbing, tend to build more lifetime value through maintenance and repairs. Every trade benefits from referrals.
RunsForYou Team
Written by the team that runs outbound calling, homeowner qualification, and appointment booking for home service contractors at RunsForYou (Runs For You LLC).
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