Definition
The number of months it takes for the gross margin from a customer to cover the cost of acquiring them.
Why it matters for growth
Payback period is a cash-flow reality check that LTV:CAC alone can obscure, since a great ratio with a 30-month payback can still starve a startup of cash.
Example
A company earning $80 in monthly gross margin per customer against a $400 CAC has a 5-month payback period.
FAQ
- What is CAC Payback Period?
- The number of months it takes for the gross margin from a customer to cover the cost of acquiring them.
- Why does CAC Payback Period matter for growth?
- Payback period is a cash-flow reality check that LTV:CAC alone can obscure, since a great ratio with a 30-month payback can still starve a startup of cash.
- What is an example of CAC Payback Period?
- A company earning $80 in monthly gross margin per customer against a $400 CAC has a 5-month payback period.