Payback Period
Months to recover CAC given ARPU and gross margin. Formula: Payback = CAC ÷ (ARPU × Gross margin). Use this calculator to estimate how many months it takes to recover customer acquisition cost. Enter CAC, monthly ARPU, and gross margin percentage.
What is CAC payback?
CAC payback is the time it takes for gross profit from a customer to recover the cost to acquire them. It connects acquisition efficiency to monetization quality.
Why it matters
- Shorter payback reduces capital needs and improves scalability.
- Signals pricing power and retention; long payback hints at issues.
- Common SaaS benchmark: < 12 months is strong for SMB motion.
How to calculate
Payback (months) = CAC ÷ (ARPU × Gross margin%). Use monthly ARPU and margin for consistency.
Example
CAC 250, ARPU 50, GM 80% ⇒ Payback 6.3 months.
Common pitfalls
- Ignoring churn—poor retention inflates true payback.
- Mixing annual ARPU with monthly margin; keep periods aligned.
- Excluding onboarding costs that delay monetization.
FAQ
What is a good CAC payback? Under 12 months for SMB; enterprise can tolerate longer with large deals.
Should I use gross or net revenue? Use ARPU and gross margin to reflect delivery costs.
How does churn affect payback? High churn reduces lifetime gross profit, effectively lengthening payback.