CAC Payback Period (Time to Recover CAC) is the number of months it takes for a customer's gross profit contribution to equal what you spent acquiring them.
Formula
Payback (months) = CAC ÷ (Monthly ARPU × Gross Margin %)
Why gross margin, not revenue?
You pay CAC upfront. It's recovered from profit, not revenue. Using revenue overstates how fast you recover CAC.
Example: CAC = $1,200, ARPU = $150/mo, Gross margin = 75% Monthly gross profit per customer = $150 × 0.75 = $112.50 Payback = $1,200 ÷ $112.50 = 10.7 months
Benchmarks
| Payback | Interpretation |
|---|---|
| < 6 months | Exceptional |
| 6–12 months | Strong (VC benchmark) |
| 12–18 months | Acceptable for enterprise |
| 18–24 months | Needs improvement |
| > 24 months | High capital intensity |
CAC Payback vs LTV:CAC
LTV:CAC tells you how much you make per customer relative to acquisition cost. CAC Payback tells you how fast you get your money back. Both matter: a 5:1 LTV:CAC with 36-month payback still requires a lot of capital.
Use the CAC payback calculator to model your unit economics.