Customer Acquisition Payback Period

The number of months it takes a business to recover the cost of acquiring a customer through the gross profit generated by that customer, a key metric for assessing growth capital efficiency.

A payback period that is too long means a business must carry the cost of customer acquisition for many months before it breaks even, requiring more capital to sustain growth. Shorter payback periods allow faster reinvestment and reduce dependency on external funding.

A founder spends £120 to acquire each new subscriber who pays £30 per month with a 70% gross margin (£21 contribution per month). Her payback period is £120 divided by £21, approximately 5.7 months. She sets a target to reduce it to four months by improving her ad targeting and reducing CAC.