Customer Acquisition Cost (CAC) and CAC Payback Period are two critical metrics for growth companies. They determine how efficiently a business can scale and how much capital is required to sustain that growth. Optimizing these metrics can improve cash flow, increase profitability, and attract investors.
In this article, we provide the latest benchmarks so you can understand performance expectations.
What is Customer Acquisition Cost (CAC)?
Customer Acquisition Cost, abbreviated CAC or CCA (for Cost of Customer Acquisition), measures the average cost of acquiring a new customer. It includes expenses such as:
- Marketing and advertising
- Business development
- Salaries for sales and marketing teams
- Sales commissions and incentive programs
- Any other costs directly related to customer acquisition
CAC Formula by ScaleXP
What is CAC Payback Period?
The CAC Payback Period refers to the time (in months) it takes for a company to recover its CAC through the revenue generated by that customer. A shorter CAC Payback Period means your business recoups its investment faster, reducing cash burn and improving financial sustainability.
To calculate CAC Payback, simply divide CAC per month by the average Gross Margin per customer per month, as shown below. The result will be the number of months required to recoup acquisition costs.
As an example, if CAC or acquisition costs is $1,000, the MRR per customer is $150, and the gross margin is 70%, the CAC payback period would be approximately 9.5 months:
= 1000 / (150 * .7) = 9.5 months
CAC Payback Formula by ScaleXP – https://scalexp.com
Why is CAC Payback important?
Investors, CEOs, and CFOs closely monitor CAC Payback because it directly impacts business valuation and financial strategy.
The Venture Capital firm – OpenView Advisors – lists it in the top three most important metrics for SaaS companies, alongside Gross Dollar Retention and Net Dollar Retention. And at ScaleXP, we have certainly seen interest in this metric surge over the last 18 months.
What are the latest CAC Payback benchmarks?
In assessing your business’ performance vs benchmarks, it is important to consider two factors:
- The size of your company measured by your ARR or annual revenue, and
- Your target customers. Are you selling to large corporates or SMEs?
The graph below shows CAC Payback Period in months for SaaS companies. The horizontal axis indicates company size, starting with companies that have less than $1M ARR and ending with those of $50M ARR.
The green line indicates top quartile performance while the light blue is bottom quartile. It is worth noting that payback periods are shortest for the smallest companies, indicating that these companies are most efficient.
Source: OpenView SaaS Benchmarks Report
What is the imapct of your target customer size?
Both the sector and the size of your target customers will impact your CAC Payback.
- Industries with higher average revenue per customer, such as enterprise fintech tend to have longer payback periods (18–24 months). This reflects their longer and more complex sales cycles.
- Sectors with shorter sales cycles and acquisition costs, such as edtech, achieve faster payback periods, making them more cash-efficient in the short term.
- The table below shows both average and good performance by size of your customers as well as your SaaS sector.
Source: First Page Sage, 2024
How can you optimise your CAC Payback?
Here are some key ways to have a material impact on your CAC Payback:
- Monitor your CAC Payback monthly. Tracking performance is critical to improvement.
- Improve your Gross Margin. Companies with the best CAC Payback period have higher Gross Margins. Review your Cost of Sales or Direct Costs to determine if you can trim costs. Hosting costs, which is typically the largest component of Cost of Sales, can be drive lower by looking for start-up or scaleup offers. AWS has generous incentives for start-ups and Google has launched some offers as well.
- Improving Sales Conversions. Train sales teams, refine messaging, and shorten sales cycles.
- Hone your marketing spend. Focus on efficient growth, rather than growth at any costs. Optimize paid campaigns and focus on high-converting channels.
Conclusion
In 2025, SaaS companies must balance growth with efficiency. By tracking and optimizing CAC and CAC Payback, businesses can build sustainable revenue models, attract investors, and maintain strong financial health.
At ScaleXP, we are passionate about using data to understand and improve performance. We have fully automated all SaaS metrics, from CAC Payback to ARR to Rule of 40. By connecting with, and importing data from both your accounting and sales or CRM systems, the ScaleXP platform creates a single source of truth for your SaaS data. To check if we integrate with your systems, just click here.
To read more about how we can automate your SaaS metrics, click here.
