Payback period is how many months (or periods) it takes to recover the cost of acquiring a customer from the profit that customer generates. Formula: Payback (months) = CAC ÷ (Gross margin per customer per month). Many brands target payback under 12 months.
Why it matters
Shorter payback means faster cash recovery and less risk when scaling. It works together with LTV:CAC: you want both a healthy ratio and a reasonable payback. Use our LTV Calculator to see payback and CAC Payback vs LTV:CAC. Back to Ecommerce Growth Stages glossary.