CAC Payback
CAC Payback Period
CAC Payback Period measures how many months it takes to recover customer acquisition costs through gross profit. Under 12 months is good; under 6 months is excellent. Longer payback means more cash tied up in acquisition, limiting growth capacity.
CAC = $12,000. Average MRR per new customer = $1,200. Gross margin = 75%. CAC Payback = $12,000 / ($1,200 × 0.75) = $12,000 / $900 = 13.3 months. Offering 2 months free for annual prepay would accelerate cash collection significantly.
CAC Payback is where unit economics meets cash flow reality. Even if your LTV:CAC ratio is 5:1, if payback is 24 months, you need a LOT of cash to grow. This is why high-growth SaaS companies obsess over payback period — it determines how fast you can reinvest in growth. The mistake most teams make: calculating payback without gross margin. If your CAC is $10,000 and ARPU is $1,000/month but your gross margin is 70%, real payback is 14.3 months, not 10. Always use gross profit, not revenue. Also: annual contracts dramatically improve payback by pulling cash forward — that's why enterprise SaaS loves them.
Define ItOther Definitions
“CAC Payback Period measures the number of months required for a company to earn back its customer acquisition costs. The calculation should include gross margin to reflect true payback.”
“CAC Payback represents the number of months of gross margin contribution required to pay back the cost of acquiring a customer. Elite SaaS companies achieve payback in under 12 months.”
“CAC Payback Period shows how long it takes for the gross profit from a customer to pay off the cost of acquiring them. Shorter payback means faster capital recycling and better growth efficiency.”
CAC Payback Period calculates the number of months required to recoup customer acquisition costs through gross profit. The formula divides CAC by monthly recurring revenue times gross margin percentage. A shorter payback accelerates cash recycling, enabling faster growth without proportionally more capital. For B2B SaaS, benchmarks vary by stage: early-stage companies often accept 18-24 month payback to acquire customers, while growth-stage companies target 12 months or less. Enterprise companies can tolerate longer payback because of higher contract values and lower churn. Annual or multi-year contracts dramatically improve payback by collecting revenue upfront — one reason why annual contract incentives are so common in SaaS.
MistakesCommon Mistakes
Forgetting to include gross margin — revenue payback ≠ profit payback
Using blended CAC for all segments instead of segment-specific CAC
Not accounting for annual contracts which accelerate cash recovery
Comparing payback across companies without adjusting for churn rates
Ignoring payback period while celebrating high LTV:CAC ratios
CAC Payback over 18 months? Your growth is eating cash.
We optimize acquisition efficiency and implement strategies (like annual contracts) that accelerate payback and fund faster growth.
Experience across
