MRR Lab

CAC Payback Calculator

Calculate how long it takes to recover your customer acquisition costs (CAC) based on customer revenue and margins.

CAC Payback Calculator

The CAC Payback Period Calculator helps you understand how quickly you recover your customer acquisition costs under different pricing and trial strategies. Compare monthly vs. annual billing and analyze the impact of free trials on your payback period.

What is CAC Payback Period?

CAC Payback Period measures how long it takes to recove the cost of acquiring a customer. Understanding this metric helps you:

  • Evaluate the efficiency of your customer acquisition spending
  • Compare different pricing strategies
  • Optimize your free trial length. Or remove your free trial.
  • Make informed decisions about monthly vs. annual billing

How to Use This Calculator

  1. Enter Your Customer Acquisition Cost (CAC)

    • Input your CAC - the total cost to acquire one customer
    • This is the baseline cost you'll be measuring payback against

  2. Configure Your Pricing Strategy

    • Set your monthly subscription price
    • Set your annual subscription price
    • Compare how different pricing tiers affect payback time

  3. Set Your Free Trial Length

    • Input the number of days for your free trial period
    • See how trial length impacts your payback timeline
    • Compare scenarios with and without trials

  4. Analyze the Results

    • View the interactive chart showing revenue over time
    • See breakeven points for both monthly and annual plans
    • Compare ROI percentages at any point in time

  5. Adjust Timeline

    • Customize the number of months to view in the forecast
    • See long-term impact of different strategies

The chart will automatically update to show:

  • Revenue accumulation curves for both monthly and annual plans
  • Horizontal line indicating your CAC threshold
  • Vertical markers showing breakeven points
  • ROI percentages and cumulative revenue at any point

Understanding the Results

Payback Timeline

The chart shows cumulative revenue over time with:

  • Horizontal lines indicating your CAC for each scenario
  • Vertical markers showing breakeven points
  • Revenue accumulation patterns for different billing types

The calculator assumes 0% churn on monthly and annual plans. In practice, some users will cancel their subscriptions before the payback period is reached.

Key Metrics

For each scenario, you'll see:

Best Practices

Monthly vs. Annual Billing

  • Annual billing typically offers faster payback due to upfront payment
  • Consider offering an annual discount to incentivize longer commitments. SaaS companies ofter offer 2 months free.
  • Balance faster payback against customer preference for monthly billing. Consider selecting annual by default.
  • Use our Monthly vs Annual Billing Calculator to model the impact on cashflow

Free Trial Strategy

  • Longer trials delay payback but may increase conversion rates
  • Short trials (7 days) can still provide value while minimizing payback time
  • No-trial approaches offer immediate revenue but may reduce conversion

Optimizing CAC

  • Higher CAC requires higher pricing or better retention to maintain efficiency
  • Consider segmenting CAC by acquisition channel
  • Balance growth speed against payback efficiency
  • Track your Net Revenue Retention (NRR) to ensure sustainable growth

Related Metrics