Glossary > CAC Payback
CAC payback, also known as customer acquisition cost payback, is a metric used by SaaS businesses to evaluate the effectiveness of their customer acquisition strategies. It measures the length of time it takes for the company to recover the cost of acquiring a new customer through its revenue.
CAC payback is calculated by dividing the cost of acquiring a new customer by the monthly recurring revenue (MRR) generated by that customer. The result is the number of months it takes for the company to recoup the cost of acquiring that customer. A shorter CAC payback period is preferred as it indicates that the company is able to quickly generate revenue and invest in further growth or expand into new markets.
CAC payback is important to SaaS businesses because it directly impacts their profitability and ability to grow. If the CAC payback period is too long, the company may struggle to maintain profitability and fund further customer acquisition efforts. CAC payback can also help SaaS businesses identify areas for improvement. For example, if the CAC payback period is longer than expected, the company may need to reevaluate its marketing strategies, improve its sales process, or optimize its pricing plans to generate more revenue from its customers.
CAC payback period = Cost of customer acquisition / Monthly recurring revenue (MRR) per customer
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