CAC Payback Period

Why does this matter?

The nature of SaaS means that companies often have to recoup a high acquisition cost over time, through the lower monthly payments made by customers. However, operating this way puts a strain on the cashflow of the business, as acquiring customers costs money which needs to be repaid over time.

What's the right amount?

This will depend on the amount of capital you have to acquire customers. However, most SaaS business aim for a payback period of under 12 months. High performers may have an even shorter time, possibly 5-7 months. If it's taking you more than a year and a half (18 months) to recoup your spend, you'll need to be extremely careful about how many customers you acquire, as you'll be operating unprofitably for a long period of time.

Where can I read more?

We recommend a couple of great sources on the CAC payback period:

• The SaaS CFO (includes a handy Excel template)
• The SaaS CFO (on Medium) (a really interesting look at whether CAC Payback or CAC/LTV Ratio is what you should be paying attention to)