What this calculator measures
CAC payback answers the founder’s cash question: when does a new customer stop being an expense? It counts the months of gross profit required to recover the acquisition cost. Unlike LTV, which leans on a churn assumption that takes a year of data to trust, payback uses only observable numbers — which is why early-stage investors often prefer it.
The formula
CAC payback (months) = CAC ÷ (ARPU × gross margin)
The gross margin term is not optional. A customer paying $99 at 80% margin contributes $79.20 a month towards repaying their CAC — the rest is hosting, support and licences. Divide by raw ARPU and you understate payback by a quarter at typical SaaS margins.
Worked example
CAC of $1,250, ARPU of $99/month, gross margin 80%. Monthly contribution = $99 × 0.80 = $79.20. Payback = $1,250 ÷ $79.20 = 15.8 months — respectable mid-market territory, but this customer is cash-negative for their entire second year of the relationship if they pay monthly.
What good looks like
Under 12 months is efficient — typical of strong SMB and product-led motions. 12–18 months is the mid-market norm. Enterprise sales tolerate 18–24 months because gross retention is higher and annual prepayment pulls the cash forward even when the accounting payback is long. Beyond 24 months, each cohort of growth consumes cash for two years before returning any — survivable only with cheap capital or prepaid contracts. Ranges by motion are on the benchmarks page.
Common mistakes
- Skipping the margin adjustment. The single most common error. Payback on revenue is not payback — the COGS portion of every invoice was never yours to keep.
- Ignoring billing terms. Annual prepay collects 12 months of cash on day one; the cash payback can be immediate even when the computed payback is 16 months. Both views matter — this calculator gives the accounting one.
- Comparing payback across motions. A PLG product at 20 months has a problem; an enterprise motion at 20 months is normal. Band by motion, not by wish.
- Forgetting churn entirely. Payback must complete within the customer lifetime — check the lifetime with the LTV calculator. Payback longer than lifetime means every sale is a loss.
FAQ
Why use gross profit instead of revenue in the payback calculation?
Because only margin repays cash. A customer paying $150 a month at 75% gross margin returns $112.50 towards their acquisition cost — the other $37.50 is spent delivering the service. Revenue-based payback understates the true recovery time by exactly your COGS percentage.
What is a good CAC payback period?
Under 12 months is efficient, and typical of good SMB/self-serve SaaS. 12–18 months is normal for mid-market. Enterprise motions tolerate 18–24 months because retention is higher and contracts are often annual-prepaid. Beyond 24 months, growth consumes cash faster than it returns it.
Does churn affect the payback period?
Not the formula — but it decides whether payback ever completes. A 16-month payback with an average customer lifetime of 40 months works; the same payback with a 14-month lifetime means the average customer churns before repaying their CAC and every sale loses money.