What is CAC Payback?

A Guide for 2023

As the cost of doing business continues to rise, more companies are turning to CAC payback as an effective way to measure their marketing investments.

But what is CAC payback? And how can it help you make better decisions in 2023?

This article will deeply dive into CAC payback and explain why this metric has become crucial for businesses looking to maximize their ROI in the coming year.

We'll also provide some practical tips on using this metric effectively in your decision-making process.

So if you're ready, let's explore what CAC payback is about!

What Is CAC Payback?

Customer Acquisition Cost (CAC) payback is a metric that helps businesses measure their marketing investments. It looks at the total cost of customer acquisition (CAC) versus the amount of money a customer brings in throughout their lifespan with the company.

This metric helps businesses determine if their customer acquisition costs are worth the financial return. If the CAC payback is positive, the customer acquisition cost will eventually be made up by the customer's revenue.

The CAC payback metric is crucial for businesses looking to scale up quickly. It allows them to ensure their acquisition costs are worth the long-term ROI.

Why Is CAC Payback Important in 2023?

The cost of customer acquisition is rising, and businesses need to ensure they get an adequate return on their investment. CAC payback can help them measure the success of their marketing campaigns and ensure that their costs align with their customers' value.

As businesses become more data-driven, CAC payback will become increasingly important. With the right metrics, companies can better track customer acquisition costs and learn which tactics and channels are the most cost-effective.

Furthermore, CAC payback can also be used to pinpoint areas for improvement in customer acquisition efforts. By seeing where the ROI is not as great as it should be, businesses can make the necessary adjustments to optimize customer acquisition costs.

Some other benefits of measuring CAC Payback might include:

  • Increased profitability: By tracking customer acquisition costs and ROI, businesses can identify where they are losing money and make changes to ensure greater profitability.
  • Greater customer loyalty: By understanding the lifetime value of their customers, businesses can create better experiences for them and foster greater loyalty over time.
  • Improved decision-making: With CAC payback, businesses can make better decisions about their customer acquisition efforts and focus on the channels that have the highest ROI.

Also, by understanding the cost of customer acquisition, businesses can plan more effectively for their future marketing campaigns and allocate resources accordingly.

For instance, if a business finds that its higher-cost channels, such as TV and radio, have good returns, it can allocate a larger budget.

Or, if they discover that specific tactics such as retargeting campaigns or influencer marketing don't provide a good return, they can adjust their strategy accordingly.

The point is that CAC payback provides vital insights into a business's customer acquisition efforts and helps them make more informed decisions.

How Can You Calculate Your CAC Payback?

Now that you know why CAC payback is essential, let's learn how to calculate it.

The formula is:

CAC Payback = Total Sales & Marketing Spend in Period / Total MRR Acquired in Period

For example, let's say you spend $300,000 on customer acquisition for a month and acquire 100 customers with an average MRR of $100.

Your CAC Payback would be: 300,000 / (100 x 100) = 30 months payback

In other words, your CAC Payback is 30 months. This means you would take 30 months to make back the money you spent on customer acquisition.

With this information in mind, you can adjust your customer acquisition strategy to ensure you get the best return on investment.

CAC Payback FAQs

Before we wrap up, let's quickly answer some of the people's most common questions about CAC payback.

What is a good CAC Payback?

Generally, a good CAC payback falls below 6 to 12 months. Anything higher than this may indicate that you are spending too much on customer acquisition or that your ROI is not as high as it could be.

This will vary depending on your business and industry, so tracking your numbers is essential to see what works best for you.

How can I improve my CAC Payback?

There are several ways to improve your CAC payback. 

First, consider optimizing your customer acquisition channels. Analyze which ones are providing the best returns and focus on those.

Second, consider creating an automated onboarding process to ensure customers get the most out of your product or service. This helps increase customer retention and lifetime value, which can reduce your CAC payback.

Finally, experiment with different pricing and promotional offers to see what works best for your target audience. This can help you acquire more customers while staying profitable.

What's the difference between CAC Payback and CAC Ratio?

The main difference between CAC payback and CAC ratio is that the former measures the time it takes to recoup the money you spend on customer acquisition. In contrast, the latter measures the overall cost of acquiring each customer.

CAC payback is often used as a measure of customer acquisition effectiveness. At the same time, the CAC ratio is more focused on the bottom line.


CAC payback is a crucial metric for businesses looking to measure the effectiveness of their customer acquisition efforts. By understanding your CAC payback, you can better optimize your customer acquisition channels and ensure you get the best return on investment.

By following the steps outlined in this article, you should be well on your way to calculating and improving your CAC payback.


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