Customer lifetime value for home service companies

Why one invoice is the wrong number

A lead that costs a lot and produces a modest first repair can look like a loss. If that customer joins a maintenance plan, books a repair in year two, replaces the system in year eight and refers a neighbor, it was one of the best leads you bought. Lifetime value, often shortened to CLV, puts that whole relationship into one number so you can make marketing decisions on it.

There is plenty of spending to capture. US households spent an average of $12,472 on home projects in 2025, up from $12,050 in 2024, according to Angi's survey^[1], and the average household completed 10 projects^[1]. A customer who trusts you is likely to bring you more than one of them.

Customers also have plenty of alternatives. In 2023 there were 178,663 plumbing, heating and air-conditioning businesses with no paid employees, on top of the employer firms^[2]. A customer who leaves after one job has many places to go, which is why the value of keeping them deserves a number.

The formula

• Average gross profit per job: revenue per job minus direct costs (parts, materials, technician labor, fees). Use margin, because revenue overstates what you can spend.
• Jobs per year: paid visits per active customer per year, from your job history.
• Expected years: how long a typical customer stays. If your annual retention rate is r, a common estimate is 1 ÷ (1 − r). Example: 80% retention gives about five years.
• Referrals: if you track referred customers to the person who referred them, add a share of their value. If you don't, leave it out rather than guessing.

Use the median job, not the mean, if a few large replacements distort your average. And be conservative with expected years: customers move, systems get replaced by other companies, and recurring services get canceled.

Worked examples by trade

These are fictional numbers to show the method, not benchmarks. Replace every figure with your own.

Example: in the HVAC row, a fictional company's plan members average 2.5 paid visits a year with $180 gross profit per visit and stay about six years: 180 × 2.5 × 6 = $2,700. That excludes the replacement many of them eventually buy, which you can add as an expected value if you know what share of plan members replace with you.

Calculate it from your own data

1. 01

   Export two to three years of paid jobs

   Customer ID, job date, trade, revenue, direct cost and lead source for every paid job.

2. 02

   Work out gross profit per job

   Revenue minus direct costs. If you don't track job costs, estimate a gross margin by job type with your bookkeeper.

3. 03

   Count jobs per active customer per year

   Use the same active-customer definition you use for retention.

4. 04

   Estimate expected years

   From your annual retention rate, or by looking at how long your oldest cohorts have stayed.

5. 05

   Multiply, then split

   Calculate a company-wide figure, then repeat by trade and by lead source. The splits are where the decisions are.

A spreadsheet is enough for the first pass. Once the method is agreed, ask whoever runs your job management system whether it can report the same figures automatically each quarter, so the number stays current without another afternoon of exports.

Use it to set marketing spend

Lifetime value tells you the most a new customer is worth. The cost to acquire a customer is your marketing spend for a source divided by the paying customers it produced. The gap between the two is your margin of safety.

1. Calculate acquisition cost per paying customer for each source: search ads, lead platforms, direct mail, referrals, yard signs.
2. Compare it with the lifetime value of customers from that source, not the company average.
3. Set a ceiling: many owners cap acquisition cost at a fraction of lifetime value, such as a third, to leave room for overheads and profit. Pick a ratio that fits your margins and cash.
4. Recheck every quarter. Lead prices move, and a source whose customers rarely return can look cheap and be expensive.

Example: a fictional cleaning company finds that customers from a lead platform cost $220 each to win and have a lifetime value of $900, while referred customers cost $60 and have a lifetime value of $2,600. Both sources are profitable, but the referral program deserves more effort, and the platform spend needs a ceiling.

Lifetime value and maintenance plans

Maintenance plans are where lifetime value earns its keep. A plan often looks thin on its own: the visits are discounted, and the technician's time is committed in advance. The value comes from what the plan changes: members stay longer, call you first when something breaks, accept recommendations more often and are easier to schedule in slow months.

1. Calculate lifetime value separately for plan members and non-members who joined in the same period.
2. Compare the difference with the cost of running the plan: discounted visits, reminder calls and admin.
3. If members are worth much more, invest in getting more customers onto the plan at the first visit.
4. If they aren't, look at what the plan includes; it may be giving away work customers would have paid for without adding loyalty.

When lifetime value misleads

Lifetime value is an estimate built on history, so it fails when the future looks different from the past. A new service line has no history. A recession can cut repeat spending. A big competitor arriving in your area can shorten customer lifespans. Treat the number as a guide for comparing sources and offers, not as money in the bank, and recalculate when conditions change. Cash matters too: a customer worth a lot over six years doesn't pay this month's ad bill.

Ways to raise lifetime value

• Offer a maintenance plan or recurring schedule on the first visit, explained plainly and without pressure.
• Book the next visit before the technician leaves.
• Cross-sell only where it fits: 44% of homeowners completed at least one maintenance project in 2025 and 22% installed a new appliance^[1], so there is genuine demand for adjacent work.
• Handle callbacks fast and fairly; a lost customer's lifetime value goes to zero.
• Keep the same technician with the same customer where you can.
• Ask satisfied customers for referrals, and track who referred whom.

Trade notes

HVAC has a large installed base to work with: two-thirds of US households use central AC or a central heat pump as their main AC equipment^[3], and those systems need maintenance and eventually replacement. Pest control has protection plans, where termite work is a strong anchor; termites cause more than $6.8 billion in US property damage each year, damage not covered by homeowners insurance, according to the National Pest Management Association^[4]. Roofing and garage doors have long gaps between jobs, so their lifetime value depends more on referrals and repairs than on frequency.

Mistakes to avoid

• Using revenue instead of gross profit.
• Applying the company average to every lead source.
• Assuming customers stay forever.
• Counting referral value without tracking referrals.
• Spending today's cash on tomorrow's lifetime value without checking you can afford the wait.

Lifetime value depends on retention, so start with customer retention: how many customers come back, then compare your sources with cost per lead by channel.