CAC payback period

How it works

Payback = CAC / (ARPU × Gross Margin). A 12-month payback means a company recovers its CAC in a year. Best-in-class SaaS companies have payback under 12 months; under 18 months is acceptable; over 24 months suggests structural problems. Payback ties directly to burn — companies with long paybacks need more capital to grow.

Related terms

• CAC (Customer Acquisition Cost)
  CAC is the total sales and marketing cost required to acquire one new customer.
• LTV (Lifetime Value)
  LTV is the total revenue (or gross profit) a company expects to earn from a customer over their entire lifetime.
• Burn rate
  Burn rate is how much cash a company spends per month, net of revenue — the rate at which it's depleting its bank balance.