CAC Payback

Customer Acquisition Cost payback period — the time it takes a SaaS company to recover its customer acquisition costs from gross margin. Standard calculations use gross-margin-adjusted payback (CAC ÷ gross margin per period). But many calculations are wrong because they ignore cash timing: if gross-margin-adjusted payback is 12 months but the company invoices on two-year annual upfront contracts, actual cash payback is negative. The distinction matters for capital allocation and cash burn analysis.

Where this appears

• Most CAC Payback Calcs for… (tweet) — Sean Fanning on the gap between gross-margin-adjusted payback and cash payback for annual-contract SaaS.