CAC Payback Period Calculator
Enter your Customer Acquisition Cost, monthly ARPA, and gross margin to see how many months it takes to recover what you spent to land that customer. The calculator shows both the simple payback and the discounted payback — the honest version that accounts for the time value of money. Because discounted cash flows are worth less than today's dollars, discounted payback is always longer. A target benchmark lets you see immediately whether your payback is healthy by SaaS standards.
Monthly Recovery
$80.00/ month
ARPA × gross margin
Simple Payback
7.50 months
Discounted Payback (10% annual rate)
7.78 months
+0.28 months longer than simple payback — discounted payback is always ≥ simple.
Cumulative Recovery (CAC = $600.00)
Curves cross the CAC threshold at the payback point.
Monthly recovery schedule
| Month | Disc. Factor | Disc. Recovery | Cumul. Simple | Cumul. Discounted |
|---|---|---|---|---|
| 0 | 1.0000 | $0.00 | $0.00 | $0.00 |
| 1 | 0.9917 | $79.34 | $80.00 | $79.34 |
| 2 | 0.9835 | $78.68 | $160.00 | $158.02 |
| 3 | 0.9754 | $78.03 | $240.00 | $236.05 |
| 4 | 0.9673 | $77.39 | $320.00 | $313.44 |
| 5 | 0.9594 | $76.75 | $400.00 | $390.19 |
| 6 | 0.9514 | $76.11 | $480.00 | $466.31 |
| 7 | 0.9436 | $75.49 | $560.00 | $541.79 |
| 8 | 0.9358 | $74.86 | $640.00 | $616.65 |
| 9 | 0.9280 | $74.24 | $720.00 | $690.89 |
| 10 | 0.9204 | $73.63 | $800.00 | $764.52 |
| 11 | 0.9128 | $73.02 | $880.00 | $837.54 |
| 12 | 0.9052 | $72.42 | $960.00 | $909.96 |
| 13 | 0.8977 | $71.82 | $1,040.00 | $981.78 |
| 14 | 0.8903 | $71.22 | $1,120.00 | $1,053.00 |
| 15 | 0.8830 | $70.64 | $1,200.00 | $1,123.64 |
| 16 | 0.8757 | $70.05 | $1,280.00 | $1,193.69 |
| 17 | 0.8684 | $69.47 | $1,360.00 | $1,263.17 |
| 18 | 0.8612 | $68.90 | $1,440.00 | $1,332.07 |
How it works
Simple payback divides your CAC by the net monthly cash your customer generates: ARPA × gross margin. If you spend $600 to acquire a customer who pays $100 per month at 80% gross margin — meaning $80 flows to the business after variable costs — simple payback is 600 ÷ 80 = 7.5 months. The formula uses fractional-month interpolation: it finds the exact fraction of the crossing month consumed, not just the nearest integer. A $600 investment recovered at $80 per month crosses the threshold halfway through month 8, pinned at 7.5 months.
Discounted payback applies a monthly discount factor — your annual discount rate divided by 12 — to each future month's recovery before summing them. This captures the real cost of waiting: $80 recovered in month 8 is worth less than $80 today. The same pinned interpolation finds the exact fractional month where the cumulative discounted recovery crosses your CAC. Discounted payback is always greater than or equal to simple payback. The gap between the two widens as the discount rate rises and as the payback horizon stretches further into the future.
The never-recovered flag fires when the Present Value of a perpetuity — monthly recovery divided by the monthly discount rate — falls below your CAC. This means no finite number of months can recover the investment once future cash flows are discounted to today. On the simple basis the investment is recoverable; on the discounted basis it is not. This is the honest surface the calculator is designed to reveal: high discount rates combined with long payback windows can make apparently profitable customer relationships permanently underwater on a net-present-value basis.
Frequently asked questions
What discount rate should I use?+
There is no single right answer — the discount rate should reflect the opportunity cost of your capital, not a number pulled from a template. Early-stage startups often use 10–20% annually to reflect the high uncertainty and alternative deployment of cash. Later-stage companies with cheaper capital may use 8–12%. Using 0% (no discounting) gives you the simple payback period, which is the industry-standard SaaS metric most investors and operators reference when they say 'payback period.' The discounted version is a tool for intellectual honesty, not a replacement for the simpler number that practitioners use.
Is a 12-month payback period really the right benchmark?+
The '12-month payback' rule of thumb is widely cited in SaaS but it is not a physical law. It originated as a proxy for capital efficiency: recovering acquisition spend within a year means the business is not a cash furnace at scale. High-growth companies with strong retention and cheap capital might tolerate 18–24 months. Businesses with shorter customer lifespans or higher churn need faster payback. The most important question is not whether you hit 12 months but whether your payback horizon is comfortably shorter than your median customer lifetime — if the average customer churns before you recover what you spent to acquire them, the unit economics are broken regardless of any benchmark.
Why does the discounted payback sometimes say 'never recovered'?+
This happens when the discount rate is so high relative to the monthly recovery that the sum of all future discounted cash flows — even across an infinite horizon — cannot reach your CAC. Mathematically, the present value of a perpetuity is monthly recovery divided by the monthly discount rate. If that number is less than your CAC, the investment cannot be recovered on a discounted basis regardless of how long the customer stays. In practice this flags situations where either the discount rate is unrealistically high or the unit economics genuinely cannot support the acquisition cost under any reasonable time-value assumption.