LanguageCAC payback calculator
Work out your CAC, how many months a new customer takes to pay it back, and how that compares with a sourced benchmark.
Work out your CAC payback
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CAC payback
- CAC
- Payback with churn
- LTV and LTV:CAC
Against the benchmark
What if
Your CAC payback shows here
CAC payback (months) = CAC ÷ (monthly revenue per customer × gross margin).
CAC = sales and marketing spend ÷ new customers won in the same period.
CAC payback (months) = CAC ÷ (monthly revenue per customer × gross margin).
Brian Rothenberg, quoted in Lenny’s Newsletter: a customer that costs $100 to win and brings $10 a month at an 80% gross margin makes $8 of gross profit a month, so payback is $100 ÷ $8 = 12.5 months, not 10.
What 16 growth experts call a good payback, as Lenny’s Newsletter published it in December 2021 (source):
- B2C: GREAT under 1 month, GOOD 6 months, OK 12 months.
- B2B selling to SMBs: GREAT under 6 months, GOOD 12 months, OK 18 months.
- B2B selling to enterprises: GREAT under 12 months, GOOD 18 months, OK 24 months.
Use gross profit, not revenue, and count all the spend that won those customers, not only ads.
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How to calculate CAC payback period
First work out CAC. Add up everything you spent to win customers in a period, such as a month or a quarter: ads, tools, contractors and the time of people doing sales and marketing. Divide it by the new customers you won in that same period. So $10,000 of spend and 100 new customers is a CAC of $100.
Then work out the gross profit one customer brings each month: monthly revenue per customer times your gross margin. Divide CAC by that number. That is your payback in months.
Use gross profit, not revenue. Revenue still has the cost of serving the customer inside it, so a payback on revenue looks shorter than it really is. In the worked example above, revenue alone says 10 months, while gross profit says 12.5.
What is a good CAC payback period?
| Business type | Great | Good | OK |
|---|---|---|---|
| B2C | under 1 month | 6 months | 12 months |
| B2B selling to SMBs | under 6 months | 12 months | 18 months |
| B2B selling to enterprises | under 12 months | 18 months | 24 months |
We don’t show an LTV:CAC benchmark because we couldn’t find a primary source for one.
How it works
The calculator runs in your browser. Your numbers are never sent or stored.
- CAC is spend ÷ new customers. If you enter revenue per year, it is divided by 12.
- CAC payback is CAC ÷ (monthly revenue per customer × gross margin). The revenue-only figure under it leaves out the margin, to show how much that flatters the number.
- Payback with churn (only if you enter churn): each month, the customers still with you bring their gross profit, and that share shrinks by your churn rate every month. It shows the month the running total reaches CAC. If it never does, it says so.
- LTV (only if you enter churn) is monthly revenue per customer × gross margin ÷ monthly churn. LTV rests on your churn guess. Early on, treat it as a rough guess.
- The benchmark line uses the source’s own words, GREAT, GOOD and OK. We don’t grade or score your number.
Questions
How do you calculate CAC payback period?
Divide CAC by the gross profit one customer brings each month. Gross profit is monthly revenue per customer times your gross margin.
What is a good CAC payback period?
In the consensus of 16 growth experts that Lenny’s Newsletter published in 2021, 12 months is GOOD for B2B selling to SMBs, 18 months for B2B selling to enterprises, and 6 months for B2C. (source)
Should payback use revenue or gross profit?
Gross profit. Using revenue makes payback look shorter than it is. (source)
What counts as spend in CAC?
Everything you spent to win those customers in the period: ads, tools, contractors and the time of people doing sales and marketing.
What is a good LTV to CAC ratio?
We don’t show a benchmark, because we couldn’t find a primary source for one. LTV also depends on a churn guess, which is shaky in the early days, so payback is the steadier number to watch.
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