How long does it take to earn back a customer?
Enter last quarter’s sales and marketing spend, new customers won, average ARR per new customer, gross margin and annual churn. The calculator returns CAC, CAC payback in months, customer lifetime value, the LTV:CAC ratio and the magic number, with our planning targets for each.
Last updated
CAC pays back in 20 months
CAC $75K, LTV:CAC 6:1, magic number 0.8.
Figures stay in your browser unless you ask us to send the full plan.
How it works
CAC
Sales and marketing spend divided by new customers in the same period.
Payback
CAC divided by monthly gross profit per customer: ARR divided by 12, times gross margin.
Lifetime value
Annual gross profit per customer divided by annual churn rate.
Magic number
New ARR won in the quarter divided by that quarter’s sales and marketing spend. It is the quarterly revenue increase, annualized, per dollar of spend.
What is a good CAC payback period for B2B?
We plan to under 18 months for mid-market and accept longer for enterprise contracts with low churn. The right number depends on your cash position and how reliably customers renew.
What LTV:CAC ratio should I target?
We plan to 3:1 or better. Much higher can mean you are underinvesting in growth; below 1:1 means each customer costs more than it returns.
Should CAC include salaries?
Yes. Fully loaded CAC includes sales and marketing salaries, tools, agencies and media. Paid CAC, media only, is useful too, but do not compare the two.
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