Free tool
CAC Payback Period Calculator
A customer who is profitable over three years can drain your cash by month three. This tells you how many months it takes them to pay back what they cost.
CAC payback period is the number of months a customer needs to repay what they cost to acquire. You get it by dividing CAC by the customer monthly contribution, that is monthly revenue multiplied by gross margin. It measures a cash constraint, where the LTV to CAC ratio measures profitability.
The months to pay back a customer
How payback is calculated
Monthly contribution = Monthly revenue × Gross margin Payback period = CAC ÷ Monthly contribution
A 480 € CAC, 79 € of monthly revenue and 80 % gross margin give a contribution of 63.20 € a month: the customer repays their acquisition in 7.6 months.
This is a cash constraint, not a profitability one. LTV to CAC says whether a customer is worth their cost; payback says when you see your money again. A company can have an excellent LTV to CAC ratio and still run short of cash, simply because it fronts 480 € per customer and waits eight months to get it back.
That figure caps how fast you can grow on your own money. At constant contribution, doubling new customers doubles the cash you have to float for the whole payback window.
Three ways this calculation goes wrong
- Using revenue instead of margin. A customer at 79 € a month costing 20 % in service does not repay 79 € a month, they repay 63.
- Ignoring churn. An 8-month payback is untenable if average lifespan is 10 months: the customer leaves almost as they finish paying for themselves.
- Averaging across channels. One channel can bring customers at 6 months payback and another at 18: the second one eats the cash, and the average hides it.
Frequently asked questions
How do you calculate CAC payback period?
Divide acquisition cost by monthly contribution, that is monthly revenue multiplied by gross margin. For a 480 € CAC, 79 € of revenue and 80 % margin: 480 ÷ 63.20 = 7.6 months.
What payback period should you target?
There is no universal figure: it depends on your cash position and your customer lifespan. The rule that holds is that payback must stay well below average lifespan, otherwise the customer leaves before returning anything.
How is this different from LTV to CAC?
LTV to CAC answers "is this customer worth their cost", payback answers "when do I see my money again". The first is profitability, the second is cash, and a company can be strong on one and blocked by the other.
Payback period getting worse?
It rises when CAC rises, which means acquisition is saturating. Same diagnosis as a drifting CPA, seen from the cash side.
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