What is Payback or Recovery Period called?
Posted: Tue Mar 18, 2025 9:01 am
The CAC Payback period is the time it takes a company to recover the cost of acquiring a customer. For example, if acquiring a customer requires $350, but advertising database their contribution generates $25 per month or $300 per year, then the payback period is 13.9 months.
Over time, customers pay a greater portion of their acquisition costs through monthly subscription payments. For SaaS companies, calculating this value helps determine how much money is needed before turning a profit. The shorter the payback period, the more profitable the company will be.
Reducing CAC recovery time also helps lower customer acquisition costs, which are completely lost when customers churn.
Why is it important to calculate the CAC Payback Period?
The payback period determines the effectiveness of the procurement strategies being implemented. The shorter this period, the more financially efficient the procurement methods will be.
Acquiring different types of customers can impact your finances if you don't fully understand how long it will take to recover your investment. This timeframe also helps determine how sustainable your strategies are over the long term. The faster your recovery method, the faster you'll have money to reinvest.
Over time, customers pay a greater portion of their acquisition costs through monthly subscription payments. For SaaS companies, calculating this value helps determine how much money is needed before turning a profit. The shorter the payback period, the more profitable the company will be.
Reducing CAC recovery time also helps lower customer acquisition costs, which are completely lost when customers churn.
Why is it important to calculate the CAC Payback Period?
The payback period determines the effectiveness of the procurement strategies being implemented. The shorter this period, the more financially efficient the procurement methods will be.
Acquiring different types of customers can impact your finances if you don't fully understand how long it will take to recover your investment. This timeframe also helps determine how sustainable your strategies are over the long term. The faster your recovery method, the faster you'll have money to reinvest.