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Customer economics
CAC payback
Months of a customer's gross profit needed to earn back the cost of acquiring them. The cash question the LTV ratio ignores.
Owned by: Senior sales analystTest band: Senior sales analyst
The formula
Payback (months) = CAC ÷ (Monthly revenue × Gross margin %)
In practice
Under 12 months funds its own growth; over 24 needs outside capital. Enterprise payback is longer and that is fine, if the churn is low.
The kind of thing the test asks
- CAC $12,000, customer pays $1,000 a month at 70% gross margin. Payback is…
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