Worked Walkthrough: Calculate CAC Payback Correctly
Calculate CAC payback using gross profit contribution from a customer rather than raw revenue alone.
Channel A has CAC of $4,000, average monthly recurring revenue of $500, and gross margin of 70%. What is CAC payback? Payback = CAC divided by monthly gross profit contribution, not monthly revenue. Teams often divide CAC by revenue and forget that hosting, service delivery, and support costs reduce the dollars actually available to recover acquisition spend. Step 1 Start with CAC = $4,000 This is the upfront acquisition spend that must be recovered. Step 2 Monthly recurring revenue = $500 Revenue tells you the inflow, but not yet the recoverable contribution. Step 3 Monthly gross profit contribution = $500…
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