Unit economics

CAC payback period

How many months of gross profit from a new customer it takes to earn back what you spent acquiring them.

CAC payback is the number of months to recover acquisition cost:

CAC payback = CAC ÷ (ARPA × gross margin)

It is usually the more useful of the unit-economics numbers, because it is about cash and time rather than about a lifetime nobody can observe yet. A business with excellent LTV:CAC and a 30-month payback still has to fund those 30 months.

Under 12 months is strong for B2B SaaS; 12 to 18 is workable; beyond 24 the business is financing its own growth for a long time and is highly sensitive to any rise in churn.

Use gross profit, not revenue. Paying back CAC in revenue that costs you 40% to deliver is not paying it back.

CAC (Customer Acquisition Cost) Total sales and marketing spend in a period divided by the customers acquired in it.
LTV:CAC ratio Lifetime value divided by acquisition cost. A rule of thumb for whether growth spending is productive.
ARPA (Average Revenue Per Account) MRR divided by the number of active accounts. Also seen as ARPU, where the unit is a user rather than an account.

CAC payback period

Related terms