Paige Finn DohertyFounding Partner, Behind Genius · Founding Partner at Behind Genius Ventures

what is a good payback period for a bootstrap company?

22 Dec 2023 · 1 min

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In this brief discussion, Speaker B advises that a bootstrap company should aim for a payback period of less than six months. They contrast this with the approach of many funded startups, which often accept much longer payback horizons (e.g., two to three years) by relying on high LTV:CAC ratios without considering the cash‑flow timing, arguing that such assumptions lack solid unit economics. Speaker A highlights that the timing of payback matters and points out that the LTV:CAC metric alone ignores the duration needed to recover acquisition costs, reinforcing the need to focus on short payback periods for sustainable growth.

Yeah, what is a good payback period?
For a bootstrap company, less than 6 months. If I see, think about it, a lot of funded companies, what they'll do is they'll say, you know what, I'm going to spend 10 to acquire this customer, but you know what, it's going to work out because you're going to pay me this 10 over 2, 3 years, which is ridiculous, right? Because in the grand scheme of things, there's no unit economics there, but they're hoping to solve for it because they're like, oh, we'll get these eyeballs, we'll get these eyeballs, and eventually—
The timing The timing really matters. And I feel like sometimes if you look at like the LTV to CAC ratio, which is like the cost to acquire a customer versus their lifetime value, that doesn't include the time that it takes for payback period. So I like that you think about that very strongly.