Lifetime Value of a Client and Your Taxes

You can use the Lifetime Value of a Client concept to cut taxes legally. Once you determine a potential client’s long term worth you can pay for certain expenses during the last few months of your fiscal year, such as advertising, promotion or mailing pieces that you’ve tested. When you mail 500 pieces, you get 50 responses – 20 of which you convert to new clients. Those clients are worth a predictable amount of money to you in the following tax year. Once you know with fair certainly what a promotion will be worth, put whatever you can afford into marketing at the end of your fiscal year. The campaign will generate no revenue for two or three months but, having tested it, you know with some certainty that the money (written off this year as a marketing expense) will come back next year as new business. If you conduct seminars, pay in advance for the space that you’re holding them and other seminar related expenses this year and have it roll back next year when your clients attend and pay you for it.

Test and learn the Lifetime Value of Your Clients. Once you know with fair certainty how many inquiries, prospects and ultimately, clients a marketing campaign produces and how long it takes to convert them, spend your money on marketing towards the end of your fiscal year. The campaign will bring in prospects relatively quickly but they won’t convert until at least January in the following fiscal year. Once you know the potential value of new clients, spend on marketing whatever you need to spend in order to reduce your taxes. Your investment will accrue future earnings.