Payback period
Payback period is the number of months a new customer needs to pay you before their net revenue covers what it cost to acquire them. For a bootstrapped company it says how long cash is tied up in each new customer, which decides how fast you can grow a paid channel without running out of money.
Formula
payback months = CAC ÷ average first-month net revenue per new customerDivide the channel’s CAC by the average net revenue (revenue minus fees) each new customer from that channel paid in their first month.
Worked example
| CAC for Google Ads | $80 |
|---|---|
| Average first-month net revenue | $40 |
- $80 / $40 = 2
A new Google Ads customer pays back their acquisition cost in 2 months.
How ProductLense shows it
ProductLense shows payback months per channel and campaign on the Profit page and in the Sources table, computed from net revenue in each customer’s first 30 days. Channels with no spend have no payback figure, which keeps the column honest for organic channels.
ProductLense needs ad spend for the channel, a billing connection so each customer’s first payments are known, and identify calls so customers resolve to the visitor whose first touch carries the channel.
Payback period: questions
- What is payback period?
- Payback period is the number of months a new customer needs to pay you before their net revenue covers what it cost to acquire them. For a bootstrapped company it says how long cash is tied up in each new customer, which decides how fast you can grow a paid channel without running out of money.
- How do you calculate payback period?
- Divide the channel’s CAC by the average net revenue (revenue minus fees) each new customer from that channel paid in their first month. For example, a CAC of $80 and $40 of first-month net revenue per customer is a payback of 2 months.
- Where does ProductLense show payback period?
- ProductLense shows payback months per channel and campaign on the Profit page and in the Sources table, computed from net revenue in each customer’s first 30 days. Channels with no spend have no payback figure, which keeps the column honest for organic channels.
- What does ProductLense need to calculate payback period?
- ProductLense needs ad spend for the channel, a billing connection so each customer’s first payments are known, and identify calls so customers resolve to the visitor whose first touch carries the channel.
- How is payback period different from CAC?
- CAC is money per customer; payback is the time it takes to earn it back. Two channels with the same $80 CAC can differ a lot: one brings $40-a-month customers who pay back in 2 months, the other $10-a-month customers who need 8.
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