Payback period is the number of months it takes to recover the cost of acquiring a customer (CAC) through the gross profit that customer generates. It measures how quickly acquisition spend is recycled back into the business. Shorter payback periods mean faster cash recovery and the ability to reinvest in growth sooner.
Shorter payback recycles cash into growth faster. Many early-stage VCs prefer < 12 months for SMB SaaS.
SMB < 12–15 months; Mid-market 12–18; Enterprise 18–24; usage-based varies by cohort.
CAC $600; ARPU $60; GM 80% → Payback = 600 / (60×0.8) = 12.5 months.
Using revenue instead of gross profit; mixing paid vs blended CAC; not cohorting.
Financials slide: show payback in months next to CAC and LTV/CAC.
If pricing is usage-based, use average gross profit per month from the target cohort.
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