Quick Answer

A company spending $50,000 to acquire 100 customers (CAC of $500), with $100/month average revenue at 70% gross margin, has an estimated payback period of approximately 7.1 months.

Total Sales & Marketing Spend ($)

New Customers Acquired

Avg. Monthly Revenue per Customer ($)

Gross Margin (%)

Common Examples

Input	Result
$50,000 spend, 100 customers, $100/mo revenue, 70% margin	CAC $500, payback ~7.1 months
$100,000 spend, 200 customers, $75/mo revenue, 80% margin	CAC $500, payback ~8.3 months
$30,000 spend, 50 customers, $200/mo revenue, 65% margin	CAC $600, payback ~4.6 months
$200,000 spend, 100 customers, $150/mo revenue, 75% margin	CAC $2,000, payback ~17.8 months
$25,000 spend, 500 customers, $30/mo revenue, 85% margin	CAC $50, payback ~2.0 months

How It Works

This calculator uses the standard CAC payback formula common in SaaS and subscription business analysis:

CAC = Total Sales & Marketing Cost / New Customers Acquired

Monthly Gross Profit per Customer = Average Monthly Revenue x (Gross Margin / 100)

Payback Period (months) = CAC / Monthly Gross Profit per Customer

Where:

• Total Sales & Marketing Cost = all spending on acquiring customers in a given period, including advertising, sales team salaries, commissions, marketing tools, and content production
• New Customers Acquired = the number of new paying customers added during that same period
• CAC = the average cost to acquire one new customer
• Monthly Gross Profit = the portion of monthly revenue that remains after covering direct costs of delivering the product or service
• Payback Period = the number of months required for a new customer to generate enough gross profit to cover the acquisition cost

Why Gross Margin Matters

The payback calculation uses gross profit rather than revenue because not all revenue is available to recover acquisition costs. A customer paying $100/month at a 70% gross margin generates $70/month in gross profit. Using revenue alone would understate the true payback period.

Benchmarks

The widely cited benchmark for a healthy CAC payback period is 12 months or less. This means the business recovers its customer acquisition investment within one year. A payback period under 12 months generally indicates efficient customer acquisition. Between 12 and 18 months is considered acceptable for businesses with very high LTV. Beyond 18 months, acquisition efficiency may need improvement.

Relationship to LTV

CAC payback period and LTV:CAC ratio are complementary metrics. A short payback period does not guarantee profitability if customer lifespan is also short. Ideally, CAC payback should be well under the average customer lifespan, leaving a substantial portion of the customer’s lifetime generating pure profit beyond acquisition cost recovery.

Worked Example

A SaaS company spends $50,000 on sales and marketing in a quarter and acquires 100 new customers. CAC = $50,000 / 100 = $500 per customer. Each customer pays an average of $100/month, and the company’s gross margin is 70%. Monthly gross profit per customer = $100 x 0.70 = $70. Payback period = $500 / $70 = 7.14 months. This means each new customer takes approximately 7.1 months to repay its acquisition cost through gross profit, which falls within the healthy benchmark of under 12 months.

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Frequently Asked Questions

What is CAC payback period?

CAC payback period is the number of months it takes for a new customer to generate enough gross profit to cover the cost of acquiring that customer. It measures how quickly a company recovers its customer acquisition investment. A shorter payback period means faster return on acquisition spending.

What is a good CAC payback period?

The general benchmark is 12 months or less. This means the acquisition cost is recovered within one year. Payback periods under 6 months indicate very efficient acquisition. Between 12 and 18 months is often acceptable for high-LTV enterprise customers. Beyond 18 months, acquisition costs may be too high relative to customer revenue.

What is included in total sales and marketing cost?

Total sales and marketing cost includes all expenses directly tied to customer acquisition: advertising spend, sales team salaries and commissions, marketing team salaries, software tools for sales and marketing, content production, event costs, and any other expenses incurred to attract and close new customers.

How does CAC payback relate to LTV:CAC ratio?

Both metrics evaluate acquisition efficiency from different angles. CAC payback focuses on the time dimension, asking how long it takes to recover the investment. LTV:CAC focuses on the return dimension, asking how much total value a customer generates relative to acquisition cost. A company with a 3:1 LTV:CAC ratio and a 6-month payback period has both strong unit economics and fast capital recovery.

Why use gross margin instead of revenue?

Revenue alone overstates how quickly acquisition costs are recovered because a portion of revenue goes to direct costs like hosting, support, and service delivery. Using gross margin reflects the actual profit available to cover acquisition costs. A customer generating $100/month at 60% margin only contributes $60/month toward acquisition cost recovery.