What is a good CAC payback period for SaaS?

The ideal CAC payback period varies by business model: PLG companies typically target 6-9 months, SMB SaaS aims for 12-15 months, mid-market targets 15-18 months, and enterprise SaaS can extend to 18-24 months. Series A investors generally expect under 18 months, while Series B+ should be under 12 months.

How do you calculate CAC payback period?

CAC Payback Period = Customer Acquisition Cost (CAC) ÷ (Average Revenue Per Account × Gross Margin %). For example, if your CAC is $12,000, ARPA is $1,000/month, and gross margin is 80%, your payback is $12,000 ÷ ($1,000 × 0.80) = 15 months.

What's the difference between CAC payback and LTV:CAC ratio?

CAC payback measures time to recover acquisition costs (in months), while LTV:CAC measures total return on acquisition spend (as a ratio). A 12-month payback with 36-month customer lifetime yields 3:1 LTV:CAC. Both metrics are essential—payback indicates cash efficiency, while LTV:CAC shows overall investment quality.

Should I use gross margin or contribution margin for CAC payback?

Use gross margin for standard benchmarking and investor reporting. Use contribution margin (which includes variable costs like customer success) for internal decision-making and more accurate unit economics.

How can I reduce my CAC payback period?

Four primary levers: (1) Reduce CAC through better targeting, improved conversion rates, or channel optimization; (2) Increase ARPA via pricing optimization, upsells, or moving upmarket; (3) Improve gross margin by reducing COGS or automating delivery; (4) Shorten sales cycles to accelerate revenue recognition.

Why is my CAC payback period important for fundraising?

CAC payback directly impacts your burn rate and runway. A 24-month payback means you're funding 2 years of customer acquisition before breaking even—requiring significant capital. VCs use payback period to assess capital efficiency. Sub-12-month payback is often a prerequisite for Series B+ funding.

CAC Payback Period Calculator

Calculate your CAC payback period instantly. Compare against SaaS benchmarks by stage & ACV. Get AI-powered recommendations to improve unit economics.

Enter Your Values

Customer Acquisition Cost (CAC)*

Total sales & marketing spend divided by new customers acquired. Include salaries, ads, tools, and overhead.

Average Revenue Per Account (ARPA)*

Monthly recurring revenue divided by total customers. Use MRR for monthly calculation.

Gross Margin*

Revenue minus cost of goods sold (hosting, support, onboarding) divided by revenue. Typical SaaS: 70-85%.

Average Customer Lifetime (months)

months

Used to calculate LTV:CAC ratio. Estimate from churn rate: Lifetime = 1 / Monthly Churn Rate.

Average Sales Cycle (days)

days

Days from first touch to closed deal. Used to calculate total time-to-payback including sales cycle.

Formula

CAC Payback (months) = CAC / (ARPA × Gross Margin %)

This formula calculates how many months of gross profit from a customer are needed to recover the cost of acquiring them. A 12-month payback means you break even on acquisition costs after one year of the customer relationship.

CAC Payback Period (months)15

15.0 months — Healthy for Series A, room for optimization.

Monthly Gross Profit$800

Annual CAC Recovery80%

Total Time-to-Payback16.0 months

Customer LTV$28,800

LTV:CAC Ratio2.4x

Months of Profit After Payback21 months

Payback RatingHealthy (12-18 months)

CAC Payback Period Benchmarks

Excellent<9 months — Top-tier efficiency, PLG-like economics

0 – 9

Strong9-12 months — Series B+ ready, efficient growth

9 – 12

Healthy12-18 months — Typical Series A target

12 – 18

Moderate18-24 months — Acceptable for enterprise/early-stage

18 – 24

High>24 months — Capital intensive, needs optimization

> 24

Source: OpenView SaaS Benchmarks 2024

How to Calculate CAC Payback Period

Enter your Customer Acquisition Cost (CAC) - total sales & marketing spend per customer
Enter your Average Revenue Per Account (ARPA) - monthly MRR per customer
Enter your Gross Margin percentage (typically 70-85% for SaaS)
Optionally add average customer lifetime for LTV:CAC calculation
Optionally add sales cycle length for total time-to-payback
View your payback period and compare against stage benchmarks
Get AI-powered recommendations to accelerate CAC recovery

CAC Payback Period Benchmarks by Stage

18-24 months

Seed Stage SaaS

12-18 months

Series A SaaS

6-12 months

Series B+ SaaS

6-9 months

PLG Companies

8-12 months

SMB SaaS (<$10K ACV)