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CAC Payback Period measures how many months it takes a cohort of customers to produce enough Gross Profit to pay back the sales and marketing expenses it took to acquire those customers.

See Gross Margin definition.

For monthly aggregation, new customers acquired in a month are compared to S&M expenses for the prior month, to account for the lag between sales and marketing activities and a customer producing revenue. For month y (e.g., January 2021):

The above formula also applies to quarterly aggregation, with the units changing to quarters. For annual aggregation, S&M from the same year is used, and the units are years.