Payback Period Calculator
Calculate simple and discounted payback period for business investments.
By Konstantin Iakovlev · Updated April 2026 · Source: SBA — Business Guide
Simple Payback
3.3 years
Discounted Payback
4.0 years
Profitability Index
2.95
Simple Payback Timeline
| Initial Investment | $100,000.00 |
| Year 1 | $30,000.00 (cumulative: $30.0K) |
| Year 2 | $30,000.00 (cumulative: $60.0K) |
| Year 3 | $30,000.00 (cumulative: $90.0K) |
| Year 4 | $30,000.00 (cumulative: $120.0K) |
| Year 5 | $30,000.00 (cumulative: $150.0K) |
| Break-Even | Year 3.3 |
Investment Metrics
| Net Present Value (NPV) | $194,544.42 |
| Profitability Index | 2.95 |
| Decision | Invest (NPV > 0) |
Use the Payback Period Calculator above to calculate your results. Enter your values and see instant results — all calculations run in your browser.
Disclaimer: This calculator is for informational purposes only and does not constitute tax, financial, or legal advice. Results are estimates based on the information you provide and current rates. Always consult a qualified tax professional or financial advisor for advice specific to your situation.
How It Works
How long before an investment earns back what you put into it? The payback period answers that by measuring the time it takes for incoming cash flow to recoup the original outlay. It is a go-to screen for judging whether a project holds up financially, whether you are weighing new equipment, a marketing push, or a fresh office lease in 2026.
There are two ways to run it. The simple payback period divides the initial investment by the annual cash inflow, giving you a quick first read. The discounted payback period goes further by applying the time value of money, discounting each future inflow at a chosen rate so the break-even point reflects today's dollars and paints a more honest picture.
Be aware of what the metric leaves out. It says nothing about the profit a project throws off once the original cost is back in your pocket, and it ignores how long the project keeps running after that. Leaning on simple payback alone is a frequent misstep, since it sidesteps both inflation and the cost of capital, factors that weigh heavily on longer-term investments in 2026.
Example: New Software Implementation
- 1 Input: A company invests $75,000 in new CRM software in January 2026. The software is expected to generate annual cash savings of $25,000. For the discounted payback, a discount rate of 8% is used.
- 2 Calculate: For simple payback, $75,000 / $25,000 = 3 years. For discounted payback, we calculate the present value of each year's $25,000 cash inflow until the cumulative discounted cash flow equals the initial investment.
- 3 Result: The simple payback period is 3 years. The discounted payback period, considering an 8% discount rate, is approximately 3.4 years.
- 4 Context: This means the company will recover its initial investment in the CRM software within 3 years on a simple basis, or slightly over 3 years when accounting for the time value of money. This information helps in comparing this investment against other potential projects and understanding its short-term financial impact.
Source: SBA — Business Guide · Last updated: April 2026
Frequently Asked Questions
What is a payback period?
What is a good payback period for a business investment?
What is the difference between simple and discounted payback?
You might also need
Self-Employment Tax Calculator 2026 — SE Tax & Quarterly Payments
Calculate SE tax, quarterly estimated payments, and total tax burden for freelancers and 1099 contractors. Free, instant results based on 2026 IRS rates.
LLC vs S-Corp Tax Comparison Calculator
Compare tax liability as an LLC vs S-Corp. See how much you can save on self-employment tax with an S-Corp election.
W-2 vs 1099 Comparison Calculator
Compare take-home pay as a W-2 employee vs 1099 contractor. Find the equivalent 1099 rate to match your W-2 salary.