Payback period calculator, with discounted payback

How it works

Add up the cash the investment brings in, year by year, until the total covers what you spent. If the money comes back part-way through a year, the calculator assumes it arrives evenly through that year.

Example: a ₹10 lakh investment that returns ₹3 lakh, ₹4 lakh and ₹5 lakh over three years. After two years ₹7 lakh is back; the remaining ₹3 lakh takes three-fifths of year three, so the payback period is 2.6 years.

Discounted payback

Money received later is worth less than money today. Discounted payback divides each year's cash by (1 + rate) for every year you wait before adding it up. At 10% a year, the same three years bring back only about ₹9.8 lakh in today's money, so the investment doesn't pay back within three years. A fourth year of ₹6 lakh would take it past the line in about 3.05 years.

Where founders use it

• Capital spending: a machine, a warehouse fit-out or a data centre commitment.
• Hiring: how many months of the new person's output cover their cost.
• Customer acquisition: CAC payback, the months of gross profit a customer takes to repay what it cost to win them (see the LTV and CAC calculator).

Its limits

Payback ignores everything after the break-even point, so a project that pays back fast but stops earning can look better than one that pays back slowly and earns for a decade. Use it alongside IRR or a DCF for bigger decisions, and as a quick filter for smaller ones.