Payback period is the number of months required to recover the cost of acquiring a customer through that customer's gross profit. Formula: CAC ÷ (ARPU × gross margin). It answers the question: how long before this customer is profitable?
Under 12 months is healthy for SMB SaaS. Enterprise SaaS can tolerate 18–24 months because of higher LTV and lower churn. Payback period directly determines how much capital a company needs to scale — a 6-month payback business can fund growth from revenue far sooner than a 24-month one.