Alex Hormozi's License to Print Money Metric: LTGP to CAC

Hey there, Welcome back to Agency Finance Letters.

This week I want to run you through the most essential metric that most agency owners overlook: the Lifetime Gross Profit to Customer Acquisition Cost ratio. 

This single metric predicts agency sustainability better than any other:

• Struggling agencies spend nearly as much acquiring clients as they make from them

• Average agencies maintain a 3:1 ratio 

• Elite agencies achieve 10:1 or better 

I just posted a YouTube video running through how you can apply this to your agency. Check it out below, and then read on!

Why Does LTGP:CAC Matter?

As an agency owner, we often celebrate winning new clients at any cost. The excitement of growth can blind us to a crucial question: Is this client actually profitable compared to what we spent to acquire them?

This creates a difficult situation where your "growth" is actually hurting your agency’s profitability rather than building it.

And if all you're ever looking at is top-line revenue or client count, then you will never spot this pattern until it's too late.

Beyond Basic Growth Metrics

Standard agency reports simply don't capture this critical relationship:

• Your revenue reports show new clients gained, not how efficient each acquisition channel is. 

• P&Ls don’t connect marketing spend to specific client returns

• Your pipeline metrics rarely track costs per acquisition stage

Having a closed view on this creates a situation where your 'successful' growth actually masks underlying financial inefficiency.

Making Lifetime Gross Profit Visible 

The question is how to break through this. It is still of course important to track your revenue growth, however with this, you should also be looking at:

• Precisely what it costs to acquire each type of client

• The average lifetime gross profit of clients by service and segment

• The relationship between these two figures across your entire client base

When you go deeper with your acquisition and retention metrics, you'll uncover opportunities your competitors miss.

Because if you're spending $3K to win a client that only generates $6K in lifetime profit, you're building your agency on quicksand instead of solid ground.

Till next week,
Joey