Payback Period

The number of months it takes to recover the cost of acquiring a customer through the gross profit generated from that customer. Payback Period equals CAC divided by Monthly Gross Profit per customer.

A payback period under 12 months is generally considered healthy. A long payback period means you are cash constrained and need significant capital to grow. Shortening payback period accelerates sustainable growth.

Your CAC is £120 and each customer generates £20 gross profit per month. Your payback period is 6 months. After month 6, every month is pure profit from that customer.