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CAC payback period calculator
In ecommerce the constraint is margin. In subscription businesses it is cash — how long you are prepared to wait to get the acquisition cost back before you can spend it again.
Set from your location. The maths is the same in any currency — only the labels change.
Total sales and marketing spend divided by new customers.
Revenue left after hosting, support and delivery costs.
Share of customers who leave each month.
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Why payback beats LTV as a decision number
Lifetime value is a forecast. It assumes a churn rate holding for years and discounts nothing. Payback period is almost a fact: it is how long before the money comes back and can be spent again. For a business funding growth out of revenue, payback is the number that decides how fast you can move.
Use gross profit, not revenue
A common mistake is dividing acquisition cost by monthly revenue. That ignores the cost of actually serving the customer — hosting, support, payment fees, third-party licences. Payback on revenue looks flattering and is wrong. This calculator uses gross margin for that reason.
If you recover the cost in five months you can spend aggressively. If it takes eighteen, you are running a lending business you did not intend to start.
The three levers
- Lower acquisition cost. Better targeting, better conversion rate, cheaper channels. Usually the slowest lever.
- Raise price or margin. Immediate effect on payback, and frequently the most neglected.
- Take payment annually. Discounting for an annual plan can reduce payback from a year to the first day. Many businesses find this is the fastest change available to them.
What this does not include
Expansion revenue from upgrades, which shortens payback. Discounts and free trials, which lengthen it. The cost of your own time. Treat the result as a planning figure for comparing segments rather than an accounting statement.
For the longer-run view of the same numbers, use the LTV calculator. For how churn alone drives lifetime, see the churn and retention calculator.
Questions
What is a good payback period?+
Under twelve months is the usual benchmark for subscription businesses, and under six is strong. What matters more is whether it is shorter than your average customer lifetime — if it is not, every sale loses money.
Should I include sales salaries in CAC?+
Yes, if you want an honest number. Full CAC is all sales and marketing cost divided by new customers. Ad spend alone is a useful channel metric but it flatters the business.
How do I handle annual contracts?+
Convert to a monthly equivalent for this calculation, then remember that cash arrived up front. Annual billing does not change the economics; it transforms the cash position, which is what payback is really about.
Why does churn appear here?+
Because it sets lifetime, and lifetime is what tells you whether payback is even reachable. A four-month payback is irrelevant if customers leave in three.
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