CAC Payback Period
The number of months it takes to recoup the cost of acquiring a customer from their revenue.
Definition
CAC payback measures how many months it takes for the gross profit from a customer to repay the cost of acquiring them. It is calculated as CAC divided by (monthly revenue per customer times gross margin). A payback period under 12 months is considered good for SaaS companies. Longer payback periods require more cash to fund growth, increasing the need for fundraising.
Why it matters
CAC payback directly affects how much capital the company needs to grow. A 6-month payback means fast cash recovery and less need for funding. An 18-month payback means the company must front 18 months of acquisition cost before breaking even, requiring more cash and runway.
Example
CAC is $12,000. Monthly revenue per customer is $2,000 at 80% gross margin. Monthly gross profit contribution is $1,600. Payback = $12,000 / $1,600 = 7.5 months. Any revenue after month 7.5 is profit.