All terms
Finance
Payback period (CAC payback)
The number of months it takes for the gross profit from a new customer to cover the cost of acquiring that customer.
By Maya Okonkwo · Last updated June 1, 2026
In plain English
You spent $1,000 to acquire a customer who pays you $100/month at 80% gross margin. Each month you recover $80. Payback is $1,000 / $80 = 12.5 months.
Example
CAC = $1,200. ARPU = $200/month. Gross margin = 75%. Gross profit per month per customer = $150. Payback = 1,200 / 150 = 8 months.
Formula
CAC Payback (months) = CAC / (ARPU × Gross margin %)
Why it matters
Payback determines how much capital you need to fund growth. Sub-12-month payback for B2B SaaS = capital-efficient; over 24 months = you'll need to keep raising. Investors price companies in part on this number.
Common mistakes
- Using revenue (not gross profit) — masks variable cost of delivery
- Including only paid CAC — sales and customer success costs belong in CAC too
- Ignoring annual prepayment — paid-up-front lowers effective payback dramatically
- Comparing across segments — SMB payback bands look different from enterprise