Payback Period
Definition
Payback Period: Payback period is how many months it takes to recover customer acquisition cost through gross margin. A 12-month payback means you break even on a customer after one year. Shorter payback enables faster reinvestment in growth.
Example Usage
“With $1,000 CAC and $100 monthly gross margin per customer, our payback period is 10 months.”
Common Misconceptions
Related Terms
Customer Acquisition Cost
Customer Acquisition Cost (CAC) is the total cost of acquiring a new customer, including marketing, sales, and onboarding expenses. CAC is calculated...
Gross Margin
Gross margin is revenue minus the cost of goods sold (COGS), expressed as a percentage of revenue. For SaaS companies, COGS typically includes hosting...
Customer Lifetime Value
Customer Lifetime Value (LTV) is the total revenue a business can expect from a single customer account over the entire relationship. LTV is calculate...
Explore More Resources
Browse Tools
Discover 100+ vetted tools for every stage of your startup journey
Explore all toolsBuild Your Stack
Take our personalized quiz to get tool recommendations for your startup
Start the checklistRecommended Reading
Curated books to help you learn, grow, and succeed as a founder
View book recommendationsListen & Learn
Top podcasts covering startups, product, growth, and entrepreneurship
Discover podcastsHelp us improve this definition
See something that could be clearer or more accurate? Let us know.