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metrics

Payback Period

Time required to recover customer acquisition cost from their revenue.

Payback Period (or CAC Payback) measures how many months it takes to recover the cost of acquiring a customer. It's a crucial metric for cash flow planning and determines how fast you can reinvest in growth.

Formula

Payback Period = CAC / (ARPU × Gross Margin)

Tips

  • Target <12 months payback for healthy SaaS
  • Shorter payback enables faster scaling
  • Annual prepayment reduces effective payback

Related Terms

CACARPUGROSS MARGINLTV CAC RATIOUNIT ECONOMICS

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