How long until you recoup what you spent to acquire a customer.
CAC payback period
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CAC Payback Period is the number of months it takes for a customer to generate enough gross profit to cover their acquisition cost. Shorter payback periods mean faster cash recovery and more efficient growth.
CAC is your fully-loaded customer acquisition cost. ARPU is the monthly revenue per customer. Gross margin is the percentage left after delivering the service. The result is in months.
Excellent
<12 months
Good
12-18 months
Concerning
>24 months
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It tells you how capital-efficient your growth is. A 6-month payback means you can reinvest cash quickly into more acquisition. A 24-month payback means you need a lot of cash on hand to grow.
Yes. Fully-loaded CAC includes paid ads, sales team salaries and commissions, marketing team costs, tools, and any other expense tied to acquiring customers. Only this gives you the real picture.
Charge more upfront (annual plans), reduce CAC by improving conversion rates, increase ARPU through better packaging or upsells, or improve gross margin.