What Is CAC Payback Period?

How to Calculate CAC Payback Period

The standard formula accounts for gross margin, not just revenue:

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

If a company spends $6,000 to acquire a customer who pays $500/month at 80% gross margin, the payback period is $6,000 ÷ ($500 × 0.80) = 15 months. After month 15, the customer becomes profitable.

Gross margin matters because not all revenue is profit. A customer paying $500/month that costs $100/month to serve generates $400/month in gross profit. The payback period should be based on profit, not gross revenue, for an accurate picture.

What a Healthy CAC Payback Period Looks Like

Industry benchmarks vary by market segment and go-to-market motion:

• Under 12 months — strong capital efficiency. Common in self-serve and product-led growth models where acquisition costs are lower.
• 12–18 months — healthy for most SaaS businesses, especially those with sales-assisted motions.
• 18–24 months — acceptable for enterprise SaaS with large contract values and high retention.
• Over 24 months — a warning sign unless offset by very high net revenue retention and long customer lifespans.

The payback period must be shorter than the average customer lifespan. If customers churn at 18 months and it takes 20 months to recover the acquisition cost, the business loses money on every customer regardless of the LTV:CAC ratio on paper.

CAC Payback Period vs LTV:CAC Ratio

LTV:CAC Ratio tells you the total return on acquisition spend. CAC Payback Period tells you how quickly that return begins. Both metrics use CAC as an input, but they answer different questions.

A company with a 5:1 LTV:CAC ratio looks healthy on paper. But if the payback period is 30 months, the business needs significant capital to fund growth while waiting for customers to become profitable. A shorter payback period means faster reinvestment — each customer funds the acquisition of the next customer sooner.

Investors increasingly look at payback period alongside LTV:CAC because it reveals cash flow dynamics that the ratio alone doesn’t capture.

How BOFU Content Shortens CAC Payback Period

CAC Payback Period improves when CAC goes down or when revenue per customer goes up. BOFU content attacks the CAC side directly.

Organic comparison pages and alternative pages acquire customers without ongoing ad spend. As the content library grows and compounds in organic traffic, the blended CAC across all acquisition channels drops, and the payback period contracts. The same MRR per customer now recovers a smaller acquisition cost in fewer months.