CAC Payback Period Calculator

How to calculate CAC Payback Period calculator?

The payback period shows how many months it takes for a customer’s gross profit to cover their acquisition cost.

Use the formula: Payback (months) = CAC / (ARPU × Gross Margin) where Gross Margin is expressed as a decimal (for example, 70% = 0.70).

Using the CAC Payback Period calculator calculator: an example

Example values used below illustrate the calculation with realistic numbers.

Step-by-step calculation:

• Step 1 — Set inputs: CAC = $1,200, ARPU = $100 per month, Gross Margin = 70%.
• Step 2 — Convert margin to decimal and compute monthly gross profit: $100 × 0.70 = $70 per customer per month.
• Step 3 — Compute payback period: $1,200 ÷ $70 ≈ 17.1 months.
• Step 4 — Interpret the result: about 17 months to recover CAC; reduce CAC or increase margin to shorten payback.

Frequently Asked Questions

Does churn affect the payback period?

Yes. Customer churn reduces expected future gross profit and can lengthen the effective payback period, so include retention assumptions when relevant.

Should I use gross margin before or after marketing costs?

Use gross margin that excludes acquisition costs. CAC is the numerator; the margin should reflect product-level profitability.

How do I judge a good payback period?

A shorter payback is generally better. SaaS benchmarks vary, but under 12 months is often considered healthy for growth-focused businesses.