Description
Months to recover CAC or CAC payback period is a SaaS metric used by companies to estimate the time (often in months) needed to recover the investment made toward customer acquisition. Simply put, this metric tells how fast a company is able to reach the breakeven point as far as its investment in customer acquisition is concerned.
Example
Months to recover CAC can be calculated as customer acquisition cost divided by gross margin or Months to Recover CAC = CAC / (ARPA*Gross Margin). Startups can use a benchmark of 12 months or below to recover CAC. For high-performing SaaS companies, this period may be as low as 5-7 months.
Why it matters
This metric offers critical insights into the effectiveness of a company’s acquisition strategy. It tells how efficiently a company uses its capital to attract new customers and whether its acquisition strategies are sustainable in the long term. The more months to recover CAC the more the company needs to work on its acquisition efficiency by either improving its customer monetization or customer acquisition cost.