Invoices / contract

The figure feeds lifetime value directly. A contract that generates twelve invoices is worth four times one that generates three, without winning a single new customer. It also reads two things at once: how long relationships last, and how billing is set up. A falling average usually means customers are leaving sooner. A rising one means the base is sticking around. It also sets a ceiling on what is sensible to spend winning a customer, because a longer relationship supports a higher acquisition cost.

• Divide total invoices by total contracts for each quarter and watch the trend, not a single reading.
• Split the number by service type, customer segment and acquisition channel to see which combinations stay longest.
• Keep retainers and fixed-scope projects in separate averages. A milestone contract always looks short, even when the client is delighted.
• Look at where contracts end. If many stop after the first or second invoice, the problem sits in onboarding, and fixing it adds the most invoices per contract.
• Give long-running clients a reason to keep billing, such as a second service, instead of relying only on new contracts for growth.

Take every invoice raised in a period and divide it by the number of contracts they belong to. If 240 invoices went out across 40 contracts, the average is six. A retainer billed monthly produces one invoice a month, so six invoices means the typical client stayed about half a year. A project contract billed in three milestones produces three invoices and then ends, however happy the client is.

• Blending retainer and project work into one average, which hides what each is really doing.
• Counting contracts that are still running as if they had finished, which makes a young business look worse than it is.