CAC Payback Period
How long it takes to recover the cost of acquiring a customer.
CAC Payback Period is the number of months it takes for the gross profit from a customer to equal what you spent to acquire them. It's arguably the most important growth metric for SaaS businesses, because it determines how much capital you need to scale.
World-class SaaS businesses have CAC payback under 12 months. 12-18 months is acceptable for venture-backed growth. Over 24 months is dangerous unless you have very high LTV and strong capital reserves.
CAC Payback = CAC / (Monthly Gross Profit per Customer)If CAC is $1,200 and the customer pays $200/month with 80% gross margin, monthly gross profit is $160. Payback = $1,200 / $160 = 7.5 months.
Frequently asked questions
Does CAC payback include marketing salaries?
It should, to be honest. Many companies report payback using only paid ad spend as CAC, which understates the real payback period.
Related terms
Total cost to acquire one new paying customer.
Total revenue (or profit) a customer generates over the entire relationship.
Revenue minus cost of goods sold, expressed as a percentage of revenue.
The normalized monthly value of all recurring revenue contracts.
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