Customer Lifetime Value: Why Your $300 Service Call Is Actually Worth $10,000+

Most contractors think about customers one job at a time.

A service call is $300. An install is $8,000. A water heater replacement is $2,500. That’s what the customer is worth, right? When you think about how marketing performance is measured, the answer changes dramatically.

Not even close.

That $300 service call customer, if you keep them happy, will need their furnace replaced in a few years. Then their water heater. They’ll want their ducts cleaned. Maybe a bathroom remodel down the road. And along the way, they’ll refer you to their neighbor, their coworker, and their brother-in-law.

Over 10 years, that $300 customer might be worth $15,000 to your business. Maybe $30,000 if they’re good referrers.

This is Customer Lifetime Value. And once you understand it, everything about marketing and customer acquisition makes more sense.

The simple formula

Customer Lifetime Value is the total revenue you’ll earn from a customer over the entire time they do business with you. The basic formula is average job value multiplied by number of jobs multiplied by customer lifespan.

Here’s a real example for an HVAC company. The average service call is $400. A typical customer comes in once a year for maintenance or repairs over a 10-year period. That’s $4,000 in service revenue. At some point during those 10 years, they’ll probably need a system replacement for around $9,000.

Total lifetime value: $13,000 from a customer who first came to you for a $400 tune-up.

And that’s just direct revenue. It doesn’t include the neighbors and coworkers they refer to you, which could easily double that number.

How LTV changes your marketing math

Here’s why this matters for marketing decisions.

Let’s say you’re evaluating whether a lead source is worth it. Without LTV thinking, you look at the first job. Lead cost is $100, first job is $400, profit margin is 30%, so you made $120. After the lead cost, you’re up $20.

Twenty dollars of profit per lead doesn’t feel great. You might conclude that these leads aren’t worth the money.

But with LTV thinking, the picture is completely different. That same $100 lead brings in a customer worth $13,000 over their lifetime. At 30% margin, that’s $3,900 in profit. After the $100 lead cost, you’re up $3,800.

Same lead, same cost, same customer. But one way of thinking says it’s barely worth it, and the other way says it’s a 38x return.

When you understand LTV, you realize you can afford to pay more for customers. You can be more aggressive in marketing. You can invest in acquisition knowing the payback is coming even if the first job doesn’t fully cover your costs.

The referral multiplier

LTV gets even more interesting when you factor in referrals.

A happy customer typically refers 2-3 people over their lifetime. Let’s say yours refer 2 on average. Those referred customers also have an LTV. If they’re worth $13,000 each, that’s another $26,000 in value that traces back to your original customer.

And the cost to acquire those referred customers is almost nothing. Maybe a $50 referral credit or just the goodwill of doing great work.

So that original $100 lead generated $13,000 in direct revenue plus $26,000 in referral revenue. You spent $100 and got $39,000 in lifetime value.

This is why retention and customer experience matter so much. Every happy customer becomes a lead generation engine. Every unhappy customer is a leak that drains referral value from your business.

Learn more about building referral programs and social proof that multiply your customer value.

LTV to CAC ratio

CAC stands for Customer Acquisition Cost. It’s what you spend to get a customer through the door.

The ratio of LTV to CAC tells you if your acquisition spending makes sense. A 1:1 ratio means you’re breaking even on acquisition, which isn’t sustainable. A 3:1 ratio is the healthy benchmark most businesses aim for. If your customers are worth $15,000 in lifetime value, you can justify spending up to $5,000 to acquire them and still have a healthy business.

If your ratio is above 5:1, you’re very profitable but possibly under-investing in growth. If it’s below 3:1, either your LTV is too low because you’re not retaining customers, or your CAC is too high because your marketing isn’t efficient enough.

How to increase LTV

Once you understand LTV, the natural question is how to make it higher.

Maintenance agreements are probably the most powerful lever. They lock in recurring revenue and keep customers in your ecosystem year after year. An HVAC maintenance plan at $30 per month is $360 per year in predictable revenue. Over 10 years, that’s $3,600 you wouldn’t have captured from a one-and-done customer.

But the real value of maintenance agreements isn’t the subscription revenue. It’s that maintenance customers are 2-3x more likely to call you when something breaks instead of shopping around. They’re first in line for replacement when their system dies. They trust you and don’t want to start over with someone new.

Cross-selling is another big opportunity. If you do HVAC, do you also offer plumbing, electrical, or indoor air quality services? Selling to existing customers is far cheaper than acquiring new ones because the trust is already there. You’re already in their home. “Hey, while I’m here for the tune-up, I noticed your water heater is getting pretty old. Want me to take a look?” That’s how a $400 service call turns into a $3,000 water heater replacement.

Staying in touch keeps you top-of-mind for when customers need you again. Email newsletters, seasonal maintenance reminders, birthday postcards, annual check-in calls. When the customer’s system breaks at 2am, they’ll call whoever they remember. Be the company they remember.

And asking for referrals systematically rather than waiting for them to happen naturally. After every completed job, your tech or your follow-up process should include a simple ask: “Know anyone else who might need our help?” Build a referral program with incentives for both parties. Track where your referrals come from and which customers are your best advocates.

The $47,000 customer

Here’s what LTV looks like in practice over a 15-year customer relationship.

Year one, they call you for a $400 service issue. You fix it, they’re happy, and they sign up for a maintenance agreement. Years two through four, you’re collecting $360 per year in maintenance fees and maybe $500 in occasional repairs. Year five, their AC dies and they call you for a $9,000 replacement because you’ve been maintaining the relationship. Years six through ten, more maintenance and occasional repairs adding up to maybe $2,500.

Year eleven, their furnace goes and they need a $7,000 replacement. Years twelve through fifteen, continued maintenance.

Direct revenue over those 15 years: around $22,000.

But this customer also referred two neighbors who became 10-year customers themselves. That’s another $25,000 in value that traces back to that original $400 service call.

Total lifetime value: $47,000.

That’s why the smartest contractors obsess over customer experience, retention, and referrals. They’re not just doing a job. They’re building a relationship that pays off for decades.

Where to go next

To understand what you should pay per lead by trade, check the benchmarks post. To make sure you’re tracking all lead sources properly, read about marketing attribution. And to turn customers into marketers who generate referrals, look at the social proof strategies.

The customer isn’t worth what they pay you today. They’re worth what they’ll pay you over the next decade. Price your marketing accordingly.