Glossary

Customer Acquisition Cost (CAC) Payback

Definition:

Customer Acquisition Cost (CAC) Payback is a growth metric that shows the time (usually in months) it takes a company to recover the costs of landing a new customer. Broken down further, this represents how long it takes to reach the break-even point. 


How is CAC payback calculated?
  1. Determine your Customer Acquisition Cost
  2. Determine your Average Revenue per Account (ARPR)
  3. Determine your Gross Margin Percentage
  4. Now you can caculate your CAC Payback with this formula: 
    (CAC / ARPA) x Gross Margin Percentage = CAC Payback

What is a good CAC payback period for SaaS companies?


Broadly speaking, SaaS businesses should aim for a five to 12-month CAC payback period. Narrowing down a more specific timeframe requires weighing factors like where you are in your business growth and your company's industry vertical.


How many months should CAC be recovered in?


Recovering your CAC in under 12 months will go a long way towards protecting your growth plans and maintaining a solid business plan. 


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