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> If you give the customer a 20% discount to pay annually, they're now paying you ~$1000 upfront, for a PBP of 0

This sounds like a huge assumption being made here - as in, this is not as easy as it sounds.

Not every customer will take that option. The PBP is 0 for that customer, not the entire population.

What’s the assumption?

We do this all the time so if I’m missing something I’m keen to hear it :)

Maybe I've misunderstood here but it sounds like you're comparing the revenue brought in from a customer to the cost of attracting them in the first place. Doesn't that ignore costs like ongoing customer service and maintaining the systems the customer is actually using? Or are all those numbers rolled up into "cost of acquisition"?

We typically calculate payback period using all go to market costs (sales + marketing + CS), but not product development or any COGS (which includes things like AWS costs).

Again, it's not a management report. You should use it for prioritisation. For example, all our go-to-market is very country-specific. So we can look at the payback period for different countries and compare how well they are performing, and that tell us which ones we should invest more into.

Every business should do it differently, based on which expenses are fixed or variable for them.

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