CAC Payback formula Excel Template - Free Calculator
Originally published: 03/06/2019 16:23
Last version published: 22/05/2020 10:26
Publication number: ELQ-39281-3
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CAC Payback formula Excel Template - Free Calculator

A simple CAC (Customer Acquisition Cost) excel model to compute the effective cost of acquiring a customer.

What is a Customer Acquisition Cost (CAC) payback period?

CAC Payback period is the amount of time it takes for your company to recover the cost of acquiring one customer. As time increases, a customer pays back more of their customer acquisition cost (CAC) through their incremental subscription payments.

How important is calculating CAC payback period?
CAC Payback period shows how efficient your acquisition strategies are. The shorter your payback period, the more money your acquisition methods make.

CAC Payback periods longer than average will tell you that you need to focus on improvements that affect CAC payback period.

The length of CAC Payback period is dependent on two components:

First - Customer Acquisition Costs (CAC) : SaaS companies assume the risk of paying CAC upfront and recovering that expenditures as the customer pays MRR over time. The greater the upfront CAC, the longer it will take to pay it back bit by bit over time.

Second - Monthly Recurring Revenue (MRR) : it is your monthly recognized revenue number. It is one month’s total of all your recurring revenue.

Time Value of Money
The formula in the Excel Template does not account for the fact that you are paying off CAC over time. A dollar in the future is worth less than a dollar today.

Revenue Deductions
The CAC payback period does not factor in ACS - the average cost of service. Why it is important? ACS is a running cost associated with MRR. It could be revenue collection, customer servers maintenance, customer support etc.

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