CAC payback: the only growth metric that matters
Why CAC payback period is the single most useful number for B2B growth decisions — and how to calculate it honestly.
LTV:CAC is the most quoted and least useful growth metric in B2B. It's a long-horizon ratio that depends on assumptions you can't yet prove. CAC payback — how many months until a new customer pays back the cost to acquire them — is the metric that actually drives good decisions.
The formula is brutal in its simplicity: fully-loaded CAC divided by gross-margin-adjusted monthly revenue per customer. Anything else is finance theatre.
Fully-loaded CAC means every cost involved in winning the customer. Salaries (sales and marketing), tools, paid spend, agency fees, and a fair share of overheads. Skipping any of these makes the number lie.
Gross-margin-adjusted means you multiply MRR by gross margin before dividing. A £1,000 MRR customer at 80% margin pays back £800/month towards CAC, not £1,000.
Healthy B2B payback periods sit at 12–18 months for SMB, 18–24 for mid-market, and 24–36 for enterprise. Beyond 36 months, you're funding growth out of equity, not customers.
The metric becomes powerful when you split it by channel and segment. One channel paying back in 8 months alongside another paying back in 30 is a portfolio decision: shift budget weekly.
Use payback as the trigger for spend decisions. If a channel's payback gets shorter, double its budget. If it gets longer, cut by 30% and investigate before re-deploying.
Don't smooth the data. Weekly volatility teaches you what's actually working. Quarterly averages obscure exactly the signals you need.
Frequently asked questions
Growth Finance — answered
- What's a 'good' CAC payback?
- Under 12 months is excellent for SMB; under 18 for mid-market; under 24 for enterprise. Faster than the benchmark = compounding business.
- Should I use gross margin or net revenue?
- Gross-margin-adjusted is the right number. Net revenue ignores the cost of serving the customer, which materially understates payback.
- How often should I recalculate?
- Monthly at minimum, weekly by channel for live programmes.
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