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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):

For quarterly aggregation, the same formula is used but multiplied by 3 in order to express CAC payback in months. For annual aggregation, S&M from the same year is used the formula is multiplied by 12.