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Payback Period

What Is the CAC Payback Period?

The customer acquisition cost (CAC) payback period, also called time or months to recover CAC, is the amount of time it will take you to break even after signing a new customer.

You can find your payback period, in months, by dividing your CAC by the product of your monthly recurring revenue (MRR) and your gross margin.

Your payback period can be important for understanding, managing, and forecasting your company’s financial health. You could also use your payback period to make pricing decisions, such as whether you should charge annually, quarterly, or monthly (or the discount you might want to offer to incentive a subscription).

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