Your CAC Payback Period or CAC Recovery Period is the amount of time it takes for your business to recover the money spent on acquiring a customer, typically expressed in months. It is a useful metric in determining how long it will take for your sales and marketing expenses to materialize into positive cash flow. Your CAC Payback Period is calculated through taking your Customer Acquisition Cost (CAC) divided by your Average Revenue per Customer (ARPC).
CAC Payback Period = CAC / ARPC
Additionally, CAC Payback can be taken one step further by adding Gross Margin to your ARPC calculation in order to eliminate direct costs from the formula:
CAC Payback Period = CAC / (ARPC × Gross Margin (%))
Related Posts
Metric Analysis: Customer Lifetime Value
Find how much revenue your customers are going to yield your company. Calculate your Customer Lifetime Value.
Metric Analysis: LTV:CAC Ratio
Make sure your business's Customer Lifetime Value is greater than your Customer Acquisition Cost. Calculate your LTV:CAC Ratio.
Metric Analysis: Annualized Run Rate
Find how much your current base of Monthly Recurring Customers will be worth over the next year. Calculate your Annualized Run Rate.