What it means
Divide what it cost to win a customer by the profit they leave you each month. The answer is how many months you are out of pocket before that customer starts making you money.
Why it matters to a small business
It is the cash-flow half of the story, and cash flow is what closes small businesses. You can have a customer worth £460 over three years and still be unable to make payroll in March, because the £75 that won them went out this week and the £460 arrives a tenner at a time. Payback tells you how much growth your bank balance can physically carry.
It costs £75 to win a customer, and a customer leaves about £25 of profit a month.
£75 divided by £25 a month
Three months. If you win twenty customers in January, you are funding roughly £1,500 of gap until April.
The bit people get wrong
Use profit, not turnover. Dividing by what the customer pays you rather than by what you keep can shorten the answer three or fourfold, and it is the single most common way a growth plan turns out to be a cash-flow plan nobody made.