CAC payback period

The number of months to earn back the CAC you spend to bring in new customer recurring revenue

What is it about?

The CAC payback period is a short-term measure and should be considered alongside the lifetime value (LTV) of a customer. LTV is the total amount of revenue that a customer will generate over the course of their relationship with your company. If the LTV of a customer is significantly higher than the CAC payback period, it may be worth investing more in acquiring new customers.

Measuring the CAC payback period is important for a SaaS company because it helps to track the efficiency of your sales and marketing efforts and identify areas for improvement. It can also help you make informed decisions about your marketing budget and allocate resources to the most effective channels or campaigns.

How to calculate?

To calculate the customer acquisition cost (CAC) payback period in a SaaS (software as a service) company, you can use the following formula:

CAC payback period = CAC / (MRR / customer)

This will give you the number of months it takes for the revenue generated by a new customer to cover the cost of acquiring that customer.

Here's an example of how to calculate the CAC payback period:

Let's say your CAC is $1,000 and your monthly recurring revenue (MRR) per customer is $100. Your CAC payback period would be:

CAC payback period = $1,000 / ($100 / customer) = 10 months