Article · About a 10 minute read

How I Calculate the CAC Payback Period

Ben Murray · The SaaS CFO Free Intermediate

Before you spend down your cushion on growth, you need to know how long it takes to earn that money back, and this is the clearest practitioner walk-through of the CAC payback calculation. Murray, a working SaaS CFO, uses gross margin (not just revenue) so the number is honest, and he pushes you to benchmark by deal size rather than chasing one magic figure. He is also blunt that the formula ignores churn, which is exactly the discipline you want when deciding if a bigger sales spend is safe.

  • CAC Payback = CAC divided by the monthly gross margin dollars a new customer generates, so margin matters as much as revenue.
  • There is no universal healthy number: judge it against your own contract sizes, since bigger deals fairly carry longer paybacks.
  • The plain formula hides churn and the time value of money, so a short payback on paper can still be a bad bet.
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The question it answers

  1. When should a profitable bootstrapped company deliberately spend down its cushion to grow faster, and when is that just gambling?

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