How the CAC payback calculator works
CAC payback estimates how long an account takes to generate enough gross profit to cover its acquisition cost. Revenue alone overstates the money available to repay acquisition spend because some of that revenue pays for delivering the service. The gross-margin adjustment makes the recurring recovery rate explicit.
The calculator also shows revenue-only payback for comparison. At a gross margin below 100%, this shorter figure is not the same as cost recovery. Use monthly revenue per account and a margin measured on a compatible basis; annual recurring revenue must be divided by twelve before entry.
Gross-margin payback months = CAC ÷ (monthly revenue per account × gross margin ÷ 100)
Worked example
Start with the example inputs below. The calculator opens with these values; reset the example at any time to compare your own scenario. Monetary examples use GBP, and all amounts must use the same currency.
| Measure | Value |
|---|---|
| Customer acquisition cost | 2400 |
| Monthly revenue per account | 200 |
| Gross margin (%) | 80 |
| Measure | Value |
|---|---|
| Gross-margin CAC payback | 15 months |
| Monthly gross profit per account | £160.00 |
| Revenue-only payback | 12 months |
This simplified payback model assumes stable monthly revenue and gross margin; it excludes churn, discounting and cash collection timing.
How to use the result
Use payback to compare acquisition scenarios with similar customers and delivery economics. If a channel costs more but wins accounts with larger recurring value, a CAC comparison alone may give the wrong impression. Payback connects those two sides of the decision.
Keep a separate cash-flow view. Annual prepayment may improve cash collection timing without changing this monthly gross-profit model. Free implementation work, introductory discounts and delayed billing can make early account economics differ from the steady-state average.
Assumptions and common mistakes
The calculation assumes monthly revenue and margin remain constant until recovery. It excludes churn, expansion, finance costs and the time value of money. A customer that cancels before the modeled payback month may never recover its acquisition cost. Zero monthly gross profit cannot produce a finite payback period.