CAC Payback Period is the number of months (or orders) before the contribution margin from a new customer covers the cost of acquiring them. It's the cash-flow flip side of LTV-to-CAC: even if a customer's lifetime value is healthy, if you have to wait 14 months to recoup acquisition cost, you need 14 months of working capital to fund growth.
CAC Payback = CAC / (Monthly ARPU × Gross Margin)
For ecommerce: CAC Payback = CAC / (AOV × Margin × Order Frequency per Period)
Typical targets
- B2B SaaS: 12 months is healthy, 18 is workable, 24+ requires deep-pocketed investors
- DTC ecommerce: most brands target payback inside 60-90 days on first order, with the second order making it profitable
- Subscription ecommerce: 4-6 months payback is the sweet spot
- Lead-gen / high-ticket B2C: payback often happens on order 1 because AOV is large
Why it matters more than LTV-to-CAC
A 5× LTV-to-CAC sounds great until you realize the LTV plays out over 36 months and you have 4 months of cash. Payback period is the fastest constraint in any growth plan — running ahead of your payback period is what blows up otherwise-healthy businesses during scaling.