CAC Payback Period

What is CAC Payback Period?

CAC Payback Period measures how many months it takes to recover your customer acquisition cost from that customer's payments. If you spend $1,200 to acquire a customer who pays $100/month, your payback period is 12 months.

This metric bridges acquisition efficiency and cash flow. A long payback period means you're financing customer acquisition out of pocket for an extended time, which strains cash and limits growth speed.

Why CAC Payback Matters

Payback period determines how fast you can reinvest in growth. With 6-month payback, every dollar spent on acquisition returns to fuel more acquisition within half a year. With 24-month payback, you're waiting two years to recycle that capital.

Investors use payback period to assess capital efficiency. Under 12 months is excellent. 12-18 months is acceptable for enterprise sales. Over 18 months raises concerns about unit economics.

Improving Payback Period

Reduce CAC through better targeting and conversion. Increase initial contract value with annual prepayments. Improve gross margins. Move upmarket to higher-paying customers.

Your unit economics:

• CAC: $3,000
• Monthly subscription: $400
• Gross margin: 75%

Monthly gross profit = $400 × 0.75 = $300

CAC Payback = $3,000 ÷ $300 = 10 months

You recover acquisition costs in under a year. After month 10, that customer generates pure profit.