How CAC payback is calculated
CAC payback = CAC ÷ (ARPU × gross margin %). It's the number of months a single customer takes to repay the cost of acquiring them, on a gross-profit basis. Net-revenue payback (ignoring margin) overstates capital efficiency — gross margin is the version that matters.
Benchmarks (2024 SaaS)
- Under 12 months — capital-efficient. Channel is scaleable. Series A bar.
- 12–18 months — workable for SMB SaaS with sticky retention. Watch CAC inflation.
- 18–24 months — risky. Requires > 90% logo retention to amortize the spend.
- Over 24 months — unsustainable for non-enterprise SaaS. Cut spend or raise ACV.
LTV : CAC ratio
LTV (gross-margin) = ARPU × gross margin ÷ monthly churn rate. The ratio LTV:CAC tells you the lifetime profit multiple per dollar spent on acquisition. The classic David Skok bench is 3:1 minimum, with 5:1+ signaling under-investment in growth.
When this calculation breaks
LTV from a static churn rate overstates long-tail value when cohorts decay non-linearly (true for most SaaS). For investor-grade reporting, use cohort-based LTV from your billing data — but as a sanity check on whether to scale a channel, this is the right back-of-envelope.
Channel-level vs. blended
Blended CAC hides channel-level dysfunction. If you're running paid + content + partnerships, calculate payback per channel — the worst channel is usually subsidizing reported numbers. Drop the bottom-quartile channel and reallocate.