CAC Payback Period

The number of months of gross profit from a customer needed to recover the cost of acquiring them.

Example

A CAC of 1,200 and monthly gross profit of 210 gives a payback of about 5.7 months.

Important

If customers typically leave before payback, every new customer loses money.

Related terms

  • Customer Acquisition Cost (CAC) — The total sales and marketing spend required to win one new customer.
  • Churn Rate — The share of customers or revenue lost over a period.

Lessons that explain it

  • Retention and unit economics say more than the growth chart — Growth can be bought. Retention shows whether customers get lasting value, and unit economics show whether each customer is worth what it costs to win. (13 min)
  • Each customer must be worth more than it costs to win — Unit economics compare what a single customer or order contributes with what it costs to acquire and serve. Growth only creates value when those numbers work. (11 min)

All 578 terms in the Investing glossary