# CAC and CAC payback

> A quarter of Northwind Care's acquisition plan: CAC, the gross profit each customer earns back, and the flattering version to avoid.

Source: https://lopifi.com/learn/saas-metrics-and-unit-economics/cac-payback
Part of: Lopifi — US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

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**How do I calculate CAC payback period?** A quarter of Northwind Care's acquisition plan: CAC, the gross profit each customer earns back, and the flattering version to avoid.

A quarter's plan spends $18,000 on sales and marketing to win 30 customers at $150 a month. CAC is $600. Each customer contributes $90 of gross profit a month at a 60% margin, so payback is 6.7 months. On revenue, ignoring the technicians' time and parts, it would be 4.0 months. That's the flattering version, and the one to avoid.

**On gross profit**
- Pro: Counts only what's left to repay acquisition
- Con: Longer, so it looks worse
- Best for: Any plan with real delivery costs, which is every plan

**On revenue**
- Pro: Shorter, and easy to compute
- Con: Overstates how fast acquisition pays back by the cost of serving the customer
- Best for: Nothing, unless labeled and shown beside the other

CAC payback, two ways.

## Where this page's rules come from

- [Wikipedia, “Customer acquisition cost”](https://en.wikipedia.org/wiki/Customer_acquisition_cost) — Customer acquisition cost — background (reference)

## Read further

- https://lopifi.com/md/calculators/cac
- https://lopifi.com/md/calculators/ltv
- https://lopifi.com/md/calculators/ltv-to-cac
- https://lopifi.com/md/calculators/magic-number
- https://lopifi.com/md/accounting/cac-payback

- **Track:** [Finance](https://lopifi.com/md/learn/finance)
- **Part of:** [SaaS metrics and unit economics](https://lopifi.com/md/learn/saas-metrics-and-unit-economics) — 5 min
- **Terms taught:** [CAC](https://lopifi.com/md/glossary/cac), [CAC payback](https://lopifi.com/md/glossary/cac-payback), [Gross margin](https://lopifi.com/md/glossary/gross-margin), [LTV](https://lopifi.com/md/glossary/ltv)
- **Previous:** [Net and gross revenue retention](https://lopifi.com/md/learn/saas-metrics-and-unit-economics/nrr-and-grr)
- **Next:** [The burn multiple](https://lopifi.com/md/learn/saas-metrics-and-unit-economics/burn-multiple)
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