Payback Period Calculator: Calculate Investment Payback
Calculate your payback period instantly. Enter your initial investment and annual cash flow to see how long until you recover your investment.
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What is Payback Period?
Payback period is the time it takes for an investment to generate enough cash flow to recover its initial cost. It's a simple way to assess investment risk—shorter payback periods mean lower risk.
Payback Period Formula
Payback Period = Initial Investment ÷ Annual Cash FlowPayback Period Benchmarks
Acceptable payback periods vary by investment type:
- SaaS implementation: 6-18 months
- Marketing campaign: 3-6 months
- Equipment/tools: 1-3 years
- Real estate: 5-10 years
Frequently Asked Questions
What is a good payback period?
Generally, shorter is better. For marketing, under 6 months is good. For equipment, under 3 years is reasonable.
Why is payback period important?
It measures risk. Shorter payback means faster recovery, less risk. Essential for comparing investments.
What are the limitations of payback period?
It ignores cash flows after payback and the time value of money. Use alongside ROI and NPV for better decisions.
How does CAC payback work in SaaS?
CAC Payback = CAC ÷ (Monthly Revenue × Gross Margin). Under 12 months is good, under 6 months is excellent.
Should I consider risk when evaluating payback?
Yes! Riskier investments should have shorter payback requirements. A 1-year payback is safer than a 5-year payback.
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