Payback period
Monetisation metric. Do they pay, and is it worth what they cost?
What is payback period?
Payback period is the time it takes for the gross profit from a newly acquired user, or cohort, to cover what it cost to acquire them.
Cohort payback: the day a cohort's cumulative gross profit per install first equals what was spent to acquire it.
How to calculate Payback period
Payback (months) = CAC ÷ (Monthly ARPU × Gross margin)- CAC
- cost to acquire one customer (or CPI, for per-install payback)
- Monthly ARPU
- average revenue per customer per month
- Gross margin
- share of revenue kept after store fees and direct costs
Where definitions differ
| Variant | Formula | When to use it |
|---|---|---|
| Simple payback | CAC ÷ Monthly gross profit per customer | Ignores churn; fine for short paybacks. |
| Cohort payback | The first day cumulative margin per install ≥ CPI | Read from cohort revenue curves; includes churn automatically. |
Payback period calculator
Example inputs: change them to your own numbers. The examples only make the calculator show a worked answer; they are not benchmarks or targets. Runs in your browser; nothing you type is sent anywhere.
- Monthly gross profit per customer
- $3.50
- Payback period
- 7.1 months
Why does churn make payback longer than the formula says?
The simple formula assumes every customer keeps paying until payback. If some leave early, the cohort's average profit per customer grows more slowly, so cohort payback comes later than CAC divided by monthly profit.
How Payback period differs by vertical
| EdTech | Annual plans paid upfront shorten payback sharply. |
|---|---|
| Fintech | Often long, because revenue per user builds over months. |
| OTT and streaming | Monthly plans make payback depend heavily on early churn. |
| Gaming | Read from ROAS curves: the day cohort ROAS on margin passes 100%. |
Common mistakes
- Using revenue instead of gross margin.
- Ignoring churn for long paybacks.
Questions
How do you calculate CAC payback?
Divide CAC by the monthly gross profit each customer brings in. $25 CAC with $5 ARPU at a 70% margin pays back in about 7 months.
Is payback the same as break-even ROAS?
They are linked: payback is reached on the day cohort ROAS, measured on gross margin, reaches 100%.
Should payback use CPI or CAC?
Use CAC per paying customer for subscription businesses and CPI per install when reading install cohorts. Say which you used.
Does the calculator send my numbers anywhere?
No. It runs entirely in your browser, and nothing you type is stored or sent anywhere.
Why do tools report different values for the same metric?
Because definitions differ: what counts as active, which attribution window applies, whether organic users are included and how days are cut by timezone. Align the definition before comparing numbers.
Which currency do the calculators use?
The calculators show US dollars, but every formula works in any currency: enter your own figures in the currency you report in and read the results in that currency.