Payback period (client acquisition)
Payback period is the number of months a new client's gross profit takes to repay what it cost to acquire them: cost per acquired client divided by monthly fee times gross margin. At a 50% gross margin, a client acquired for twice their monthly fee pays back in four months.
Use gross profit rather than revenue in the denominator. An account at a 30% margin pays back almost twice as slowly as the same account at 55%, and a model built on fee alone hides that.
Payback is what tells you how much acquisition spend the business can fund from cash. A twelve-month payback means every new client is a loan the agency makes to itself for a year, and growth at that rate consumes cash in proportion to how well sales is going.
Covered in depth
What an agency client acquisition system is, and what it has to contain before it produces pipelineNot sure which of these is capping you?
Six questions, two minutes, and the diagnostic names the one constraint worth working on first.