CAC payback period
- Customer acquisition cost
- $3,333
- LTV : CAC
- 3.3 : 1
- Gross-margin LTV
- $10,920
- Average customer lifetime
- 40 months
Blended across all channels. LTV uses gross margin and a simple churn-based lifetime, so it ignores expansion revenue. Benchmarks vary by segment: treat them as reference points, not targets.
Talk through your numbersHow the numbers are calculated
Customer acquisition cost (CAC)
Total sales and marketing spend in a period divided by new customers won in that period. Include ad spend, tools, agencies, content, events and the fully loaded cost of your sales and marketing team. Leaving out salaries is the most common way companies flatter their CAC.
CAC payback period
CAC divided by the monthly gross profit from one customer (average revenue per account × gross margin). It answers: how many months until a new customer has paid back what it cost to win them? Many investors look for 12 to 18 months for mid-market SaaS, shorter for SMB, longer for enterprise.
LTV:CAC
Lifetime value divided by CAC. Here, lifetime value is monthly gross profit per customer divided by monthly churn. A ratio around 3:1 is a widely used benchmark. Much lower and growth is expensive; much higher may mean you are under-investing in growth.
Limits of these formulas
They use averages and ignore expansion revenue, which can make LTV far higher for products with strong net revenue retention. Blended CAC also hides big differences between channels. Calculate CAC by channel to know where to put the next dollar.
A worked example
An illustrative mid-market SaaS company, using the default values in the calculator.
| Input or result | Value | How it is calculated |
|---|---|---|
| Monthly sales and marketing spend | $40,000 | Ads, tools, agencies and team costs |
| New customers per month | 12 | From your CRM or billing system |
| CAC | $3,333 | $40,000 ÷ 12 |
| Monthly gross profit per customer | $273 | $350 ARPA × 78% gross margin |
| CAC payback | About 12 months | $3,333 ÷ $273 |
| LTV | $10,920 | $273 ÷ 2.5% monthly churn |
| LTV : CAC | About 3.3 : 1 | $10,920 ÷ $3,333 |
Common questions
What is a good CAC payback period for SaaS?
It depends on segment. Self-serve SMB products often aim for under 12 months, mid-market for 12 to 18 months, and enterprise products can sustain 24 months or more because contracts are larger and retention higher.
Should CAC include salaries?
Yes, for a true picture. Fully loaded CAC includes the salaries and overheads of sales and marketing staff. Paid CAC, using ad spend only, is useful for channel decisions but understates the real cost.
How can we improve CAC payback?
Three levers: lower acquisition cost (better channels and conversion rates), higher revenue per account (pricing and packaging), or higher gross margin. Conversion improvements are often the fastest. See CRO.
See CAC by channel, not just blended
Our growth audit breaks down acquisition cost and payback by channel, so you know which ones to scale and which to cut.