What is the CAC payback period?
CAC payback period is the number of months it takes for a new customer's gross profit to repay the cost of acquiring them. To find it, divide CAC by the monthly gross profit each customer brings in.
Last reviewed .
How to calculate CAC payback period
Divide your CAC by the monthly revenue per customer after applying your gross margin.
Percentages in this equation use numeric percent values: 40 means 40%.
Why payback period matters
Payback period is about cash. A customer who pays you back in a few months frees up money to spend on winning the next one, while a long payback ties up cash.
It's common in subscription and recurring-revenue businesses, where revenue arrives month by month.
How to read it
There isn't one right payback period for every business. It depends on your cash position, how long customers stay, and how much risk you can accept.
Compare the payback period with your typical customer lifespan. If customers leave before payback, you lose money on them.
Variations
Some teams use revenue instead of gross profit, which gives a shorter and less cautious number. Using gross profit is generally the more careful approach, so state which one you use.
Disclaimer
This calculator is for informational purposes only, and we don't guarantee the accuracy of its results. You're responsible for verifying any results before relying on them. See our terms of use.
Common questions
How do you calculate CAC payback period?
Divide CAC by monthly revenue per customer times gross margin. For example, a $600 CAC with $100 monthly revenue at a 60% margin is $600 divided by $60, or 10 months.
What is a good CAC payback period?
It depends on your business model, cash reserves, and customer retention. Shorter is safer, but the right target is one your cash flow can support and your customers' lifespan exceeds.
How is payback period different from LTV:CAC?
Payback period tells you how fast you recover the cost of a customer. LTV:CAC tells you how much total value a customer returns over their whole relationship compared with that cost.
Does CAC payback work for one-time purchases?
It fits recurring revenue best. For one-time sales, you can compare CAC with the profit on the first order, and look at repeat purchase patterns for the rest.
Want help putting this to work?
Tell us where your marketing stands today, and we'll show you what to do first.