Calculate your break-even
Worked example
A service business pays an agency $5,000 a month and spends $5,000 a month on ads. One new customer is worth $4,000 in first-year gross profit, and the ads produce 2 customers a month today.
- Customers needed to cover the fee: $5,000 ÷ $4,000 = 1.25 extra customers a month.
- Customers needed to cover fee plus ad spend: $10,000 ÷ $4,000 = 2.5 a month.
- Uplift needed on today's results: 1.25 ÷ 2 = 62.5%.
- Cost per customer today (ad spend only): $5,000 ÷ 2 = $2,500.
- Cost per customer at break-even: $10,000 ÷ 3.25 = about $3,077.
Read that last line carefully: at break-even, each customer costs more than before, because the fee is now in the total. The agency only earns its place if it goes beyond break-even, and that's where follow-up speed, qualification and trust before the click decide the result.
Methodology
- Extra customers to cover the fee = agency fee ÷ first-year gross profit per customer.
- Customers to cover fee plus ad spend = (fee + ad spend) ÷ first-year gross profit per customer.
- Uplift = extra customers needed ÷ customers produced per month today.
- Cost per customer at break-even = (fee + ad spend) ÷ (today's customers + extra customers needed).
All values come from you. The calculator has no defaults from outside data, and the pre-filled figures are only the worked example. It doesn't account for sales time, software costs, refunds, repeat purchases beyond the first year or tax. The fee-only break-even treats today's ad spend as already justified by today's customers; the fee-plus-ad-spend line is the stricter test. A longer customer lifetime would lower the break-even, so use first-year gross profit if you want a conservative answer.
What next?
If the uplift needed looks plausible against your follow-up speed and close rate, the fee can pay back. If it needs a doubling you can't explain, look at where enquiries leak first: why leads go cold and the revenue chain. To run this on your own numbers, Book A Free Call.
