Lifetime Value By Contract Type

Lifetime Value By Contract Type

Boutique professional service firms with long client contracts are worth more than those with short contracts. Why? The further out a firm can forecast its revenues and profits the less risky the business is. Lower risk = higher valuation.

A common mistake founders of pro serv firms make is not understanding the difference between pricing and contracting. The price is what a client pays. The contract is how the payment is made.

For example, royalties on intellectual assets tend to have long shelf lives. And fixed bids on projects tend to have short shelf lives.

Share it on social :