Measurement

Payback period

Payback period is how long it takes for the contribution margin from a customer to recover what it cost to acquire them.

For a business funding growth from cash flow this matters more than LTV:CAC. A 4:1 ratio that takes eighteen months to pay back will run you out of cash long before the ratio is realised, and a business can grow itself into insolvency on excellent unit economics.

Measure it in orders as well as months for subscriptions — "recovered by the second box" is a sharper operational target than a duration, and it survives changes in billing cadence.

Related terms