CAC Payback Period
How many months of a customer's revenue (or gross profit) it takes to earn back what you spent acquiring them.
The fork, why two teams get different numbers
Gross-margin vs revenue is the core fork. The rigorous version divides CAC by the customer's MONTHLY gross profit (ARPA × gross margin %); the loose version divides by monthly ARPA and ignores cost to serve, shortening payback by the whole margin gap (a 75%-margin business reports payback ~25% shorter when it omits margin). Second fork: new-MRR-only vs including expansion, crediting expected upsell shortens payback but assumes growth that hasn't happened. Third: CAC scope (blended/paid/fully-loaded) flows straight through. Finance uses gross-margin, new-MRR-only; growth teams use revenue and credit expansion.
The trap
Omitting gross margin makes payback look faster than the business can actually recover cash, you have not been paid back until the gross profit, not the revenue, equals CAC.
- The full trap, worked on a real export
- Every formula variant, spelled out
- The reconciliation anchor, what to tie it to and when to refuse
Reference: SaaS operating-metric convention (no single standards body)