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CAC payback period calculator
How many months of gross profit it takes to earn back what you spent acquiring a customer. It is the closest thing revenue operations has to a cash-efficiency number, and it is routinely quoted on revenue rather than gross profit, which makes it look better than it is.
Fully loaded: sales and marketing salaries, commission, tooling and programme spend for the period, divided by new customers won in that period.
Average recurring revenue per new account, per month. Use new-customer ARPA, not blended across the whole base.
Revenue minus cost of delivering the service, as a percentage. Using 100% here is the same as calculating payback on revenue, which is the error this calculator exists to prevent.
PAYBACK PERIOD
16.0 months
12–18 months — workable
Common for mid-market and enterprise motions where contract values are larger and sales cycles longer. Watch it against your churn: payback only matters if customers stay past it.
The formula
CAC payback (months) = CAC ÷ (monthly ARPA × gross margin)
Published because a calculator that hides its arithmetic is asking to be trusted rather than checked. Every input above is defined precisely in the note under its field — most disagreements about these numbers turn out to be disagreements about what went into them.
WHERE THIS FAILS
Payback says nothing about whether customers survive to the payback point. A 14-month payback with 18-month average tenure is a business that loses money on every customer.
It ignores expansion. If accounts reliably grow, the effective payback is shorter than this figure, and a static ARPA understates the return.
CAC is the fragile input. It depends entirely on which costs you load into it and over what period — the same business can produce wildly different CAC figures defensibly.
Calculated on revenue rather than gross profit, payback looks shorter by exactly the inverse of your margin. At 75% margin that is a 33% understatement.
DEFINITIONS USED HERE
OTHER CALCULATORS
- Pipeline coveragePipeline coverage = open pipeline ÷ quota for the period
- Net revenue retentionNRR = (starting ARR + expansion − contraction − churn) ÷ starting ARR
- LTV:CAC ratioLTV = (monthly ARPA × gross margin) ÷ monthly churn rate · Ratio = LTV ÷ CAC
- Ramp-adjusted capacityCapacity = (ramped reps × quota × period/12) + (ramping reps × quota × productive months/12), where a linearly ramping rep averages half productivity during ramp
- Rule of 40 scoreRule of 40 = revenue growth rate (%) + profit margin (%)
- Forecast accuracyAccuracy = 1 − |actual − forecast| ÷ actual · Bias = (forecast − actual) ÷ actual
- Magic numberMagic number = (current quarter ARR − prior quarter ARR) × 4 ÷ prior quarter S&M spend
Run the whole audit, not one number
These calculators each answer one question. The courses here build the full picture — inventory, process, measurement — with interactive tools that keep your data and export it as a workbook.
COMMON QUESTIONS
- What is a good CAC payback period?
- Under 12 months is efficient, 12–18 is workable, and over 24 tends to mean you are financing growth rather than funding it. But the honest answer is that it depends on your retention: payback is only meaningful relative to how long customers stay. A 12-month payback is excellent with five-year tenure and catastrophic with fourteen-month tenure, and no benchmark can tell you which you have.
- Should CAC payback use gross profit or revenue?
- Gross profit. Revenue payback ignores the cost of actually delivering the service, so it flatters the number by exactly the inverse of your gross margin — at 75% margin, a revenue-based payback is 25% shorter than the real one. If you see a payback figure quoted without a margin assumption stated, assume it was calculated on revenue.
- What costs belong in CAC?
- Everything spent to acquire new customers: sales and marketing salaries and commission, programme and advertising spend, and the tooling those teams use. The genuinely contested items are customer success costs, which mostly belong in retention rather than acquisition, and brand spend, which has a return horizon longer than the period you are measuring. Whatever you decide, write it down and keep it constant, because period-over-period comparability matters more than theoretical precision.
- How does CAC payback relate to LTV:CAC?
- They answer different questions from the same inputs. Payback is a cash question: how long until this customer has repaid what they cost. LTV:CAC is a return question: how much total gross profit the relationship produces relative to that cost. A business can have a healthy LTV:CAC and a payback long enough to run out of cash before reaching it, which is why the two should always be read together.