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Investment returns

Payback Period Calculator

See how many months an investment takes to pay for itself from monthly net cash inflow, simple or discounted, with payment leakage included when you model it from unit sales.

Fact-checked November 1, 2026. Results are estimates for planning; your processor's statement is the record.

What is the payback period?

The payback period is the time it takes for an investment to return its cost from the cash it generates. A $50,000 investment that produces $6,000 of net cash a month pays back in 8.3 months. It is the simplest capital budgeting measure, and the one most operators use for equipment, software, inventory buys and marketing programs.

Simple payback (months) = investment ÷ monthly net cash inflow
Discounted payback = months until the sum of inflows ÷ (1 + r)^month ≥ investment
Example: $50,000 ÷ $6,000 = 8.3 months. At a 10% annual discount rate the discounted payback is 8.7 months.

Simple vs discounted payback

Simple payback treats a dollar in month 12 the same as a dollar today. Discounted payback applies a rate (your cost of capital) to each month's inflow, which pushes the payback later. Set the discount rate in the advanced panel; 8% to 12% is typical for a small or mid-size business funded by a mix of equity and debt.

Discount rate Payback on $50k at $6k/month
0% (simple) 8.3 months
8% 8.6 months
12% 8.8 months
20% 9.1 months

Modeling payback from unit sales

Switch to Units × margin when the investment is a product launch or inventory buy. The calculator takes units per month, price, variable cost and fixed costs and computes the monthly inflow itself, after payment fees, refunds and chargebacks.

Textbook inflow
$6,000
400 units × $35 margin − $8,000 fixed
Real inflow
$5,005
after $2.04 fee, refunds and disputes per unit
Payback
10.0 months
instead of 8.3
Difference
+1.7 months
from payment leakage alone

Payment leakage lengthens payback by 20% on these inputs. Processing fees are most of it. Refunds cost the fee on the refunded sale, and each dispute costs the sale, the fee and a $15 dispute fee. The chargeback share is small per unit but compounds across every month of the payback window.

Uneven cash flows and ramp-up months

Most launches do not produce the same cash every month. Sales ramp, a seasonal peak lands, or a renovation month goes negative. The simple formula assumes a flat inflow, so use the cumulative method instead:

Payback = full months before recovery + unrecovered amount ÷ inflow in the recovery month
Example: $50,000 invested; inflows of $2,000, $4,000, $6,000, then $8,000 a month. After month 6 the cumulative total is $36,000. Month 7 adds $8,000, so payback = 6 + 14,000 ÷ 8,000 = 7.75 months.

To model a ramp in the calculator, enter the average monthly inflow expected over the first year rather than the steady-state figure. A launch that reaches $6,000 a month only by month 4 might average $4,500 across 12 months, which pushes payback from 8.3 to 11.1 months.

CAC payback for subscription and repeat-purchase businesses

Payback also applies to each customer, not only to equipment or inventory. CAC payback is the months it takes a new customer's gross margin to repay what it cost to acquire them.

CAC payback (months) = CAC ÷ (monthly revenue per customer × gross margin)
Example: $120 CAC ÷ ($60 × 60%) = 3.3 months. With 3% refunds and 0.5% disputes removed from the margin, 3.5 months.

Stripe's guidance, last updated September 2024, calls 12 months or under healthy for SaaS and consumer subscriptions, with top SaaS businesses at five to seven months. B2B with annual contracts can run past 12 months.

A customer who disputes a renewal before payback is a pure loss: the acquisition spend, the refunded charge and the dispute fee. The CAC calculator in the related tools below works this per customer.

What is a good payback period?

Marketing campaigns
1 to 3 months
SaaS customer acquisition
12 to 18 months
Equipment and tooling
24 to 36 months
Inventory buys
2 to 6 months
Software and automation
3 to 12 months

Shorter is better, with one caveat: payback ignores everything after the payback point. A 6-month payback on something that stops producing in month 8 is worse than a 12-month payback on something that produces for five years. Use payback to screen, then check lifetime return.

Reading the cumulative cash-flow table

The table under the results starts at minus the investment and adds each month's inflow. The month the cumulative figure crosses zero is the payback month. Rows continue to month 12 or until payback, whichever is later, so you can see the first year even on fast paybacks.

Frequently asked questions

How do I calculate payback period?

Divide the investment by the monthly net cash inflow. $50,000 ÷ $6,000 = 8.3 months. If inflows vary by month, add them up until the total reaches the investment.

What is a discounted payback period?

Payback calculated after discounting each month's inflow by your cost of capital. It is always longer than simple payback and better reflects the time value of money.

What is a good payback period?

Under 12 months for marketing and software; 2 to 3 years is common for equipment. Shorter payback means lower risk, but it ignores returns after the payback point.

Payback period vs ROI: what is the difference?

Payback measures time to recover the investment. ROI measures the return as a percentage of the investment over a period. The calculator shows both: payback in months and 12-month ROI.

How do refunds and chargebacks affect payback?

They reduce monthly net inflow. On the default product launch, processing fees, 3% refunds and 0.5% disputes together cut inflow about 17%, from $6,000 to $5,005, and stretch payback from 8.3 to 10 months. Fees are most of the gap; each dispute also costs the sale and a $15 fee.

What discount rate should I use?

Your weighted average cost of capital. Many small businesses use 8% to 12%; venture-backed companies often use 15% to 25%.

Is there an Excel formula for payback period?

Not a single built-in one. Put the investment as a negative in row 1, add a running cumulative column with =SUM($B$1:B2), then use =COUNTIF(cumulative range,"<0") for the full periods and add the last negative balance divided by the next period's inflow for the fraction.

How do I calculate payback with uneven cash flows?

Add each month's inflow to a running total until it reaches the investment. Payback is the number of full months before that point, plus the shortfall divided by the inflow of the month that crosses zero. The calculator's table does this for a flat inflow.

What is CAC payback period?

The months a new customer's gross margin takes to repay the cost of acquiring them. CAC ÷ (monthly revenue per customer × gross margin). Twelve months or under is the usual target for subscriptions; disputes and refunds push it out.

Payback period vs NPV: which should I use?

Payback screens for speed and risk. NPV sums every discounted cash flow over the project's life and says whether it creates value at all. A project can pay back in a year and still have a negative NPV if it needs reinvestment later. Use payback first, then confirm with NPV.

Sources

Lost disputes stretch every payback period.

Chargeflow recovers revenue you have already earned, which shortens payback on everything you invest in.

Calculate recovery ROI