The number of months it takes for the gross margin generated by a customer to pay back the cost of acquiring that customer.
Why it matters: Shorter payback periods mean less working capital is tied up in acquiring customers. Most startups aim for a payback period of 12 months or less.
In practice: If CAC is $1,200 and a customer generates $100 in gross margin per month, it will take 12 months to break even on that acquisition.