CAC payback period
The number of months it takes for the gross profit from a new customer to repay what you spent to acquire them.
CAC payback is CAC ÷ (monthly revenue × gross margin). If your CAC is $300, the average customer pays you $100/month, and gross margin is 80%, monthly gross profit per customer is $80 — payback period is $300 / $80 = ~3.75 months.
The intuition: how fast does an acquired customer pay back the cost of acquiring them? Shorter is better. Long payback periods chain together — if you're spending $1M a month on acquisition with 18-month payback, you need $18M of working capital just to fund the lag.
Common SaaS benchmarks:
- Under 12 months — healthy. You can fund growth out of operations.
- 12-18 months — workable but requires capital efficiency discipline.
- Over 18 months — likely needs continuous fundraising to support growth.
- Over 24 months — usually a sign the business model isn't quite working at this CAC.
Payback period interacts with LTV:CAC. A 3:1 LTV:CAC with a 6-month payback is excellent. A 3:1 LTV:CAC with a 24-month payback works mathematically but stresses cash. Both ratios matter.
Watch for payback creep as you scale — easy customers convert fast; hard-to-reach customers don't. Cohort payback by acquisition channel surfaces this.
See also
- CAC (Customer Acquisition Cost) — The total cost of getting one paying customer. Marketing + sales spend in a period, divided by new customers from that period.
- LTV:CAC ratio — The relationship between what a customer is worth to you over their lifetime and what you paid to acquire them. The most important single number in unit economics.
- Gross margin — Revenue minus the direct cost of delivering that revenue, divided by revenue. The percentage of each dollar of revenue you keep before operating expenses.
- Unit economics — The revenue and costs associated with one customer (or one transaction). The fundamental health check for whether scaling makes the business better or worse.
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