What’s the lifetime value of your staff?

• Author: Mike Clark Mike Clark is director and lead trainer and facilitator at Think Right business training company.
• Published date: 04 November 2021
• Publication title: Guardian, The

When calculating cost the temptation can be to only look at immediate, measurable and directly related costs. One of the costs that many businesses fail to calculate is the cost of acquiring new talent and new clients.

The charge for recruiting a top-quality salesperson can be three to four months of their annual salary. A similar expense can be incurred acquiring a new A client when viewed from their contribution to turnover.

A great way to give perspective is to look beyond the immediate upfront costs. Looking at their (potential) lifetime contribution helps a business to value its staff and clients.

Lifetime value is calculated in a variety of ways. When looking at internal team members we can look at the cost of recruitment, onboarding and retention (which obviously includes things like salary, KiwiSaver, ACC, uniform, training, licences, vehicles, equipment and tools, etc) and then compare what additional revenue and services the business is able to earn and to offer because that person is part of the team.

Sometimes businesses calculate each trained and contributing team member should allow them to increase their turnover by $x amount, or grow market share by y amount, eg. one gold standard aims for $1 million in turnover for each person employed.

In a similar way, you can calculate the cost of acquiring a new client. By calculating the marketing expenses required to secure a client (this includes rep visits...