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CAC Payback Period Calculator
Calculate how long it takes to recover your customer acquisition costs. Essential for cash flow planning.
Calculate Your Payback Period
Total cost to acquire one customer
Average monthly revenue from one customer
Percentage of revenue that's profit (after COGS)
Your Payback Period
Time to Recover CAC
0.0 months
Cash Flow Impact
Shorter payback periods mean faster cash flow recovery and more capital for growth investments.
Related Calculators
What is CAC Payback Period?
CAC Payback Period is the time it takes to recover the cost of acquiring a customer through the gross profit they generate. It's a critical metric for understanding cash flow and business sustainability.
Why Payback Period Matters
Even if your unit economics look good on paper, a long payback period can kill your business through cash flow problems. Here's why it matters:
- Cash Flow Management: You need enough runway to cover the time before customers become profitable
- Growth Constraints: Longer payback periods limit how fast you can grow without raising capital
- Investor Appeal: VCs prefer payback periods under 12 months for scalable businesses
- Risk Assessment: Shorter payback = less risk if customers churn early
How to Calculate Payback Period
Payback Period = CAC / (Monthly Revenue × Gross Margin %)
Payback Period Benchmarks
| Business Model | Target Payback | Notes |
|---|---|---|
| SaaS (B2B) | 5-12 months | Lower for SMB, higher for enterprise |
| E-commerce | 1-3 months | Faster due to immediate purchases |
| Subscription | 3-6 months | Depends on pricing tier |
| Marketplace | 6-18 months | Longer due to take rates |
The Cash Flow Reality
Critical Insight:
A 24-month payback period might look fine on paper, but it means you need 2 years of runway for every customer you acquire. Most startups don't have that luxury. Aim for 12 months or less.
How to Reduce Payback Period
- Reduce CAC: Optimize marketing channels, improve conversion rates, focus on organic growth
- Increase pricing: Higher prices mean faster payback, but test carefully to avoid hurting conversion
- Improve gross margins: Reduce COGS, negotiate better deals with suppliers
- Upsell faster: Get customers to higher tiers or add-ons sooner
- Annual billing: Collect more revenue upfront to improve cash flow
Payback Period vs. Other Metrics
- CAC: Tells you cost per customer, but not when you'll recover it
- CLV:CAC Ratio: Shows long-term profitability, but ignores cash flow timing
- Payback Period: Shows exactly when you'll break even on each customer
Common Mistakes
- Ignoring churn: If customers churn before payback, you lose money. Factor in retention rates.
- Using revenue instead of profit: Payback should be based on gross profit, not revenue.
- Not accounting for payment terms: If customers pay annually, your actual cash payback is faster.
- Forgetting about growth: Faster growth requires more working capital if payback is long.