Growth & SaaS
CAC payback period
The CAC payback period is the number of months it takes for a new customer’s gross profit to repay what it cost to acquire them.
CAC payback = CAC ÷ (Monthly revenue per new customer × Gross margin)
Worked example
| Customer acquisition cost | $6,000 |
| Monthly revenue per new customer | $500 |
| Gross margin | 80% |
$6,000 ÷ ($500 × 80%) = $6,000 ÷ $400 = 15 months
Why it matters
Until payback, every new customer is a cash outlay. The longer the payback, the more cash growth consumes and the more exposed the business is to customers leaving before they have paid back.
Common mistakes
Where it misleads
Using revenue instead of gross profit, which makes payback look months shorter than it is.
Ignoring churn: if many customers leave before month 15, the average customer never pays back.
Using the blended revenue of all customers when new customers start on smaller plans.
Related terms
Keep reading
- Customer acquisition cost (CAC)Customer acquisition cost is the average sales and marketing spend needed to win one new customer.
- LTV to CAC ratio (LTV:CAC)The LTV to CAC ratio compares the gross profit a customer is expected to bring in over their lifetime with the cost of acquiring them.
- Cash burn and runwayNet burn is how much more cash a business spends than it takes in each month; runway is how many months its cash would last at that rate.
Stop calculating it by hand.
Dear CFO keeps your statements, forecasts and metrics current from the systems you already run.