How long it takes the business to return what you invested. The shorter, the lower the risk.
↳ Analogía
If you invest $100,000 and the business generates $25,000 per year, payback is 4 years. After that, everything is profit.
Ejemplo numérico
Payback < 3 years: low risk. 3–5 years: acceptable depending on industry. More than 5 years: only if NPV is clearly positive and flows are stable.
Investment: $50,000. Constant annual flows of $20,000. → Payback = 2.5 years. From year 3 onwards, every dollar of cash flow is net profit.