CAC Payback Period Calculator

Calculate how long it takes to recover customer acquisition costs

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SaaS typically has 70-85% gross margin

What is CAC Payback Period?

CAC Payback Period measures how many months it takes to earn back your customer acquisition cost through gross profit. It's a key metric for measuring sales and marketing efficiency.

Formula:

Payback = CAC / (Monthly ARPU × Gross Margin)

Benchmarks:

  • <6 months: Excellent - very efficient acquisition
  • 6-12 months: Good - healthy for most SaaS
  • 12-18 months: Okay - room for improvement
  • >18 months: Warning - may indicate efficiency issues

Early-stage companies often have longer payback periods that improve with scale.

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Frequently Asked Questions

Why is payback period important? ▼
Payback period tells you how long your capital is tied up in customer acquisition before generating profit. Shorter payback means faster reinvestment in growth and lower risk - if customers churn before payback, you lose money.
Payback period vs. LTV:CAC - which matters more? ▼
Both matter! LTV:CAC tells you total return on acquisition investment. Payback period tells you how quickly you get that return. A business with 5:1 LTV:CAC but 24-month payback has cash flow challenges despite good unit economics.
Why include gross margin? ▼
Using gross margin gives you payback in terms of actual profit, not just revenue. If you have 80% gross margin, only 80% of each dollar goes toward recovering CAC - the rest covers costs of service.
How can I reduce payback period? ▼
Three levers: (1) Reduce CAC through better targeting, conversion optimization, or organic channels, (2) Increase ARPU through pricing or upsells, (3) Improve gross margin by reducing cost of service. Annual contracts also help by front-loading revenue.
What's a good payback period for my stage? ▼
Early stage: 12-18 months is acceptable as you're investing in growth. Growth stage: Target 12 months or less. Mature: Best-in-class achieve under 6 months. B2B enterprise typically has longer payback but higher LTV.

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