I see it happening everywhere. Businesses that look successful on paper aren’t growing. Their customer lifetime value is stagnating, and traditional growth metrics are hiding the real story.
Their calendars are full of discovery calls, their funnels seem to be working, sales calls feel like a breeze, and their ads are converting.
They’re doing everything “right” to get in front of their prospects…
But it’s not reliable.
Why?
They’re stuck.
Running faster and faster just to stay in place.
Why?
Because they’re measuring the wrong things.
3 Critical Business Performance Metrics Every Service Business Needs to Track
Today, I want to share three numbers that tell the real story of business success. And no, I’m not talking about vanity metrics or surface-level statistics. These are the hard numbers that separate thriving businesses from those stuck on the hamster wheel of constant acquisition.
Client Acquisition Cost (CAC): The Metric That Tells Only Half the Story
Let’s start with Client Acquisition Cost (CAC).
This is the jewel of the industry: how much you spend to get a new customer.
CAC = Total Sales & Marketing Costs ÷ Number of New Clients Acquired
Most businesses track this religiously, optimize it endlessly, and celebrate when it goes down. And yes, it matters. But it’s just the tip of the iceberg.
Think about it like this: knowing how much it costs to acquire a customer is like knowing how much it costs to go on a first date. Important? Sure. But it tells you nothing about building a lasting relationship.
What they need to do is switch out CAC for CLV.
Customer Lifetime Value (CLV): Measuring the True Depth of Customer Relationships
This is where Customer Lifetime Value (CLV) enters the picture. CLV measures how much revenue a customer generates over their entire relationship with your business.
Think of CLV as measuring the depth of your relationship. It’s not about that first date – it’s about all the shared moments, the anniversaries, the growth together. The real value comes from nurturing long-term connections, not just collecting phone numbers.
Ready for some math? Me neither.
CLV = Average Purchase Value × Average Purchase Frequency × Average Customer Lifespan
Here’s what makes this number fascinating: it’s often 5-25 times more expensive to acquire a new customer than to retain an existing one.
Yet how many businesses track CLV as religiously as they track CAC?
The industry has it backward.
We celebrate new client wins while barely noticing the quiet exodus of existing clients. We pour resources into acquisition while underinvesting in retention. It’s a pattern that keeps repeating because we’re measuring the wrong things.
Net Revenue Retention (NRR): The Ultimate Business Growth Indicator
This is the big one: Net Revenue Retention (NRR). It shows whether your existing customers are spending more or less with you over time.
NRR is like measuring the strength of your relationship over time. Are you just collecting numbers, or are you gonna put a ring on it?
NRR = ((Starting Revenue + Expansion - Downgrades - Churn) ÷ Starting Revenue) × 100
If your NRR is over 100%, your existing customers are spending more with you over the course of your relationship. Under 100% means they’re spending less (or leaving)… “it’s not me, it’s you.”
Think about that for a moment. You can have amazing marketing, low CAC, and solid initial CLV.
But you could still be losing ground if your NRR is below 100%.
The Strategic Approach to Customer Value and Business Growth
This is what I tell my clients: When you genuinely commit to solving your customer’s problems, something magical happens with your NRR. Not only do they stay longer, but they often spend more money with you.
They upgrade to higher-tier programs. They join your masterminds. They sign up for VIP days.
Why?
Because clients who experience growth with you become your biggest advocates.
They don’t just stick around. They want more of what you offer.
This organic expansion is what pushes your NRR above 100% without requiring constant marketing effort.
The Business Retention Problem: Why Most Companies Are Stuck in a Growth Trap
In the coaching and consulting world, relationships are everything.
When a client leaves, you’re not just losing revenue. You’re losing the compound effect of all the trust you’ve built.
And the worst part? Most businesses don’t realize this is happening because they’re too busy chasing the next new client to notice.
It’s like having a bucket with holes. You can pour water in faster (better acquisition) or fix the holes (better retention). Guess which one is more sustainable?
This isn’t theoretical.
Look across the industry, and you’ll see a pattern that’s killing businesses. They’re pouring endless energy into acquiring new clients while barely noticing the ones slipping out the back door.
On the surface, everything looks great. The marketing is working, and the sales calls are happening. But underneath, a critical number tells a different story: NRR below 100%.
When businesses operate this way, they’re not growing. They’re replacing.
It’s an exhausting cycle, and here’s what makes it tragic: they have the process and the program that could solve their clients’ problems. But they’re so focused on the next sale, the next launch, the next marketing campaign that they’ve lost sight of what matters—the transformation they promised to deliver.
Actionable Steps to Improve Your Business Performance Metrics
Start tracking all three numbers, but pay special attention to NRR. It’s the canary in the coal mine for service businesses.
As soon as you finish this email, here’s what I want you to do:
- Look at your CAC. How much are you spending to acquire each new customer?
- Calculate your CLV. What’s the lifetime value of your average client?
- Determine your NRR. Are your existing customers spending more or less with you over time?
For coaches and consultants, a healthy NRR is 110% or higher. That means for every $100 in revenue you had last year, you should have at least $110 from those same customers this year. Anything less means you’re working harder than you need to.
Confused? I used a lot of acronyms in this blog post, and you might be scratching your head right now. But if I’ve learned anything in my 15+ years as a marketer and business owner, it’s that you need to pay attention to these numbers, so don’t be afraid to reread this post.
