GTM Glossary · Metrics
CAC Payback Period
The number of months of gross profit from a new customer required to repay the cost of acquiring them.
[01]What It Means
Calculated as acquisition cost divided by monthly gross profit per customer. Gross profit, not revenue: a payback figure built on top-line numbers flatters every plan that has real delivery cost.
[02]Why It Matters
Payback governs cash, and cash governs how fast you can enter a second market. Two businesses with identical LTV:CAC behave completely differently at twelve versus twenty-four months of payback.
[03]Where It Goes Wrong
Using revenue instead of gross profit and reporting a payback that never arrives.Ignoring the ramp period of a new seller, which lengthens real payback in an entry market.Optimising payback by shrinking the segment until growth stops.
[04]Related Terms