Lifetime Gross Profit, LDGP, the arms race of business. LDGP, the amount of gross profit a customer collects over the lifespan of a customer. In other words, how much total money you make from a customer minus everything it costs you to deliver it. Now, that's easy to understand, but can be hard to figure out if you don't have a CRM or a customer relationship management tool. That tracks some of these metrics for you. That's okay, though. I'm going to give you some back-a-napkin ways to calculate it. LTGP, step one, gross profit. The first thing you have to figure out is gross-profit. Gross-profit is what's left over from a purchase after you deliver the goods or service. Note, this isn't net profit, which is what's left over at the end of the month after you paid all expenses.

This is just what's left over on the core thing you sell.

You then run your business on the gross profit to pay the rest of your bills and hopefully have some left over for your pocket at the end of the month.

Author note, many entrepreneurs mix up gross profit and net profit.

Gross profit is money left over after only subtracting the cost of making

and delivering your product or service. Net profit is money left over after subtracting all costs.

Product example. I sell a widget for $100. It cost me $20 to manufacture and ship the widget to the

end consumer. My gross profit is $100 minus $20 equals $80.

Also, gross margin is your gross profit expressed as a percentage of the total price you charge.

Gross margin and gross profit get used a lot in similar situations.

Don't let it confuse you.

It's the same concept.

Gross profit is expressed in an absolute dollar amount, while gross margin is the same

concept expressed as a percentage. In this example, my gross profit is 80 bucks, but my gross margin is

80%, aka $80 divided by $100 equals 80%. That was a good warm-up. Let's do one for services.

So for example number one. I deliver services monthly. I have one account representative per

10 clients. My clients pay $3,000 per month each. My rep cost me $6,000 per month. Let's figure out

the gross profit. Clients per rep equals 10. Revenue per client equals 3,000. Cost per rep equals 6,000.

So I make 10 clients per rep times $3,000 per month equals $30,000 per month per

representative. Assuming I have no other cost for delivering my service, my gross profit is $30,000

of revenue minus $6,000 of cost, which equals $24,000. My gross margin is $24,000 divided by $30,000,

which is 80%. So my gross profit on a single customer is $3,000 times 80% equals

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