CAC payback period
Payback period definition for SaaS and AI founders: what it means, how to calculate it, and common pitfalls when reading it in dashboards.
The payback period is how many months of gross profit it takes to earn back what you spent acquiring a customer.
Formula
Payback months = CAC ÷ (ARPA × Gross margin %)
In practice
Using revenue instead of gross profit makes payback look shorter than it is.
Related terms
Related
- ARPAAverage MRR per paying customer.
- ARRAnnualized recurring revenue: MRR multiplied by twelve.
- CACSales and marketing spend per new customer.
- ChurnCustomers or recurring revenue lost in a period.
- COGSThe direct cost of delivering your product to existing customers.
- Contribution marginRevenue minus all variable costs, including variable sales costs.
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