The growth, expansion, and wealth goals that you’ve set for your agency are within your control. If you want to know how to keep up momentum and make sure that you keep pushing that curve, gain more clients, and make more money, the PIE equation can help you. Understanding the PIE equation can take your agency to the next level.
Reaching your goals doesn’t have to be overly complicated. It is preferable to achieve more wealth employing realistic, strategic, and steady growth. Read on to understand how the PIE equation can help your new agency turn into an eight-figure agency.
What Does the PIE Equation Tell Me?
It is imperative that you use the PIE Equation to help you grow your agency. It is an insightful tool that will project the future growth of your company and help you assess where your revenue will eventually cap out. By gathering a few pieces of essential information about your agency and inserting them into the equation, you will see your growth potential based on where things currently stand.
The PIE Equation
Below, you will find an example of the PIE equation in action. Obviously, your values will be different, but this will demonstrate how it works.
Your churn % is churn by the end of the month divided by your number of active clients at the start of the month. Essentially, this number is the percentage of how many of your clients leave before the end of the month.
Once you have this information, you can calculate your average number of new clients per month, average LTV per client, and your monthly recurring revenue cap.
Client Cap
To figure out where your client numbers will cap out, you must divide your new clients per month by your churn rate %.
Using the example above, the monthly client cap is 36.
In other words, if you continue averaging 4 new clients per month and your churn rate % stays the same, you’ll eventually reach a client cap of 36 per month. Unless one of your variables changes, your number of clients won’t break this cap.
Average Customer Lifetime Value (LTV)
To calculate the LTV, we’ll apply the same process, but we’ll divide the average price per client by the churn % rate.
Using the same example agency, you’ll get an average LTV of $11k.
Monthly Recurring Revenue Cap
To calculate your new business revenue per month, simply multiply your number of customers by their average price. Then to get your MRR Cap, you’ll divide the new business revenue in a month by your churn rate %. In this example, your MRR will cap out at $47k.
Let’s look at this scenario. If your average new client acquisition per month increases to 7. Your churn rate % stays the same. Your client cap will rise to 59. New business revenue grows to $9k. And your MRR cap becomes $77k.
What Does This Mean For My Agency?
There is no getting around it. If you want your MRR cap to rise, something will need to change. To break the current cap, you will have to improve your churn % or you will need to increase the amount of new clients you bring in per month.
Using the PIE equation is one of the best things you can do to scale your agency and streamline your strategic growth plan.
Work With 8 Figure Agency & Expand Your Wealth
8 Figure Agency is an experienced and motivated team that wants to help you take your business to the next level. Schedule a call with us today and let us show you how to grow your company’s wealth!
