--- title: "How to calculate CAC and CAC payback" description: "Customer acquisition cost and CAC payback without the finance-speak: the formulas, what to include, worked examples, and healthy numbers for SaaS." source: https://savepad.app/blog/how-to-calculate-cac --- [Blog](https://savepad.app/blog) · 6 March 2023 # How to calculate CAC and CAC payback Customer acquisition cost and CAC payback without the finance-speak: the formulas, what to include, worked examples, and healthy numbers for SaaS. *A table of acquisition costs per channel saved in Savepad* **TLDR** - **CAC** = everything you spent to win customers ÷ the number of new customers. Include salaries and tools, not just ads. - **CAC payback** = CAC ÷ (monthly revenue per customer × gross margin). It’s how many months until a customer has paid back what they cost. - Under 12 months is healthy for SaaS selling to small businesses. Free calculators: [CAC](https://savepad.app/free-tools/cac-calculator) and [payback period](https://savepad.app/free-tools/payback-period-calculator). ## Customer acquisition cost > CAC = total sales and marketing cost ÷ new customers For the same period. If you spent €30,000 on sales and marketing last quarter and won 100 customers, CAC is €300. ### What goes in “total cost” This is where people cheat, usually without meaning to. A real CAC includes: - Ad spend, every channel - Salaries of the marketing and sales people (or the share of their time spent on acquisition) - Tools: your CRM, email platform, ad tools, analytics - Agencies, freelancers, contractors - Events, sponsorships, swag “Our CAC is €40” usually means “our paid CAC is €40”, ad spend only. Fine as a channel number, misleading as a company number. Track both: **blended CAC** (everything) and **paid CAC** per channel. ### A worked example | Cost | Monthly | | --- | --- | | Ads (Google, Meta, LinkedIn) | €8,000 | | One marketer and half a salesperson | €9,000 | | Tools | €1,000 | | Total | €18,000 | | New customers | 60 | | Blended CAC | €300 | ## CAC payback CAC alone doesn’t tell you much. €300 is cheap if customers pay €200 a month and terrible if they pay €5. Payback ties it to revenue: > CAC payback (months) = CAC ÷ (monthly revenue per customer × gross margin) With €300 CAC, €50 a month per customer, and an 80% gross margin: 300 ÷ (50 × 0.8) = **7.5 months**. Gross margin matters because revenue isn’t profit. A SaaS with heavy hosting or support costs keeps less of each €50. ## What’s healthy Rough rules of thumb for SaaS: - **Selling to small businesses:** under 12 months. They churn faster, so you need your money back sooner. - **Mid-market:** 12 to 18 months. - **Enterprise:** longer is fine, because contracts are annual and customers stay for years. And the classic pairing: **LTV:CAC** of 3:1 or better. I wrote a longer take on that on my own blog, about why the [LTV to CAC ratio](https://ronakganatra.com/posts/ltv-cac-b2b-saas) gets abused in B2B SaaS. ## For ecommerce If you sell products, not subscriptions, look at [break-even ROAS](https://savepad.app/blog/break-even-roas) for first-order profitability, and CAC against average order value and repeat rate. ## Keep the context The number goes on a slide. The ads, landing pages, and onboarding flows behind a good CAC are worth keeping too, so next quarter you know what to repeat. That’s what a swipe file is for, and the [competitor research](https://savepad.app/use-cases/competitor-research) use case shows how to keep the other side: what your competitors charge and how their pricing pages changed. *A mock LinkedIn ad for the fictional dev tool Tidepool* 0935 · LinkedIn · CAC €210 *A mock dev tool landing page for Tidepool* 0132 · landing page · 4.2% CVR *A mock onboarding email* 0229 · onboarding · day 0 The work behind a CAC number, kept in one folder: the ad, the landing page, and the onboarding email. ## FAQ ### What is the formula for CAC? CAC is total sales and marketing cost in a period divided by the number of new customers in that period. Spend €30,000 in a quarter, win 100 customers, and your CAC is €300. ### How do you calculate CAC payback? CAC payback in months is CAC divided by monthly revenue per customer times your gross margin. A €300 CAC, €50 a month, and 80% margin pays back in 300 / (50 × 0.8) = 7.5 months. ### What's a good CAC payback period? For SaaS selling to small businesses, under 12 months is healthy. Mid-market companies often run 12 to 18 months, and enterprise can go longer because customers stay for years. [Join the waitlist](https://savepad.app/#waitlist) ## Read these next - [How to calculate break-even ROAS: Break-even ROAS is the return on ad spend where you stop losing money. The formula, worked examples at different margins, and the mistakes people make.](https://savepad.app/blog/break-even-roas) - [How to use the LinkedIn Ad Library: The LinkedIn Ad Library shows every ad a company ran in the past year, free. How to search it, what the EU data shows, and how to keep the good ones.](https://savepad.app/blog/linkedin-ad-library) - [LinkedIn ad examples: LinkedIn ad examples by format, from document and thought leader ads to images and video, the patterns that work for B2B, and how to find competitors' ads.](https://savepad.app/blog/linkedin-ad-examples)