Definition
What is CAC Payback Period?
The months needed for a customer’s contribution profit to repay their acquisition cost.
CAC payback measures how long acquisition spend stays "underwater" before a customer becomes cash-flow positive. It matters independently of LTV:CAC: a great lifetime ratio with a 24-month payback can still sink a bootstrapped company, because cash is committed long before it returns. Subscription businesses commonly target under 12 months.
Formula
Payback (months) = CAC ÷ (Monthly Revenue per Customer × Gross Margin)Example
CAC of $300, $50/month revenue at 80% gross margin: payback = $300 ÷ ($50 × 0.8) = 7.5 months.