Unit economics & SaaS

CAC payback period

How many months of a customer's gross profit it takes to earn back the cost of acquiring them.

Owned by: Senior analystTest band: Senior analyst

The formula

CAC payback (months) = CAC ÷ (Monthly ARPA × Gross margin %)

This is the cash question LTV:CAC ignores. A great ratio with a 30-month payback needs a lot of funding to grow.

CAC is $6,000. The customer pays $500 a month at 75% gross margin. CAC payback is…