CAC Payback Period Calculator
How many months of gross profit it takes to repay the cost of acquiring a customer — the metric that decides how fast you can grow without funding.
Payback is CAC divided by monthly gross profit per customer.
How the cac payback period calculator works
Payback is CAC divided by monthly gross profit per customer. Twelve months or less is generally considered healthy for a subscription business; beyond eighteen, growth consumes cash faster than it generates it.
It matters more than the LTV:CAC ratio for cash planning, because a business can have excellent lifetime economics and still run out of money waiting for them. Payback tells you when the cash comes back; LTV tells you how much eventually does.
Formula: payback = CAC / (MRR × gross margin)
Worked examples
| Inputs | Payback period | Note |
|---|---|---|
| 900 CAC, 120 MRR at 78% margin | 9.62 months | 9.6 months |
| A higher CAC | 21.37 months | 21 months — cash-hungry |
| A thinner margin | 18.75 months | payback nearly doubles |
FAQFrequently asked questions
What is a good CAC payback period?
Twelve months or less is the usual benchmark for subscription businesses. Under six months growth is close to self-funding.
Why does payback matter more than LTV:CAC?
Because it is a cash question. A business can have a 5:1 lifetime ratio and still run out of money if the cash takes three years to come back.
Should I use revenue or gross profit?
Gross profit. Using revenue understates the payback by whatever your cost of service is, which for many products is 20 to 30%.
Why show survival at payback?
Because a long payback interacts badly with churn. If only 60% of customers are still there when the cost is repaid, the average customer never repays it.
How do I shorten it?
Raise price, improve margin, or lower acquisition cost. Annual prepayment is the fastest lever — it collapses payback to the moment of sale.
Where these figures come from
- Reichheld (2003), Harvard Business Review — The One Number You Need to Grow — the paper that introduced Net Promoter Score
- Financial Reporting Council — the UK accounting regulator
Last checked: September 2026. These are the industry-standard definitions; where companies commonly disagree, the page says so.