CAC Payback Period

Metric

CAC payback period is the number of months required for a customer's cumulative gross profit to equal their initial acquisition cost.

Layman Explanation & Analogy

Think of CAC Payback as the time it takes to break even on an individual customer. If you spent $120 to acquire a subscriber and they generate $20 in profit each month, it takes 6 months before that customer stops being an expense and starts generating net profit.

Mathematical Formula

Payback Period (months) = CAC ÷ (Monthly Revenue per Customer × Gross Margin %)

Worked real-world example

CAC is $300, average monthly subscription revenue is $50, and gross margin is 80% ($40 monthly profit). Payback Period = $300 ÷ $40 = 7.5 months.

What people get wrong & common traps

Dividing CAC by raw revenue instead of gross margin is a dangerous error. You haven't paid back acquisition costs until the actual profit (after server, payment, and support costs) covers the CAC.

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