CAC Payback Period Calculator

CAC is customer acquisition cost: what you spend on ads to win one new customer. The CAC payback period is how long it takes that customer to earn it back in margin. Until then, you're funding the customer out of your own cash.

For a brand selling consumables, the first order rarely covers CAC. The money comes back over repeat orders. A short payback means you can reinvest quickly and grow without much cash. A long one means every new customer ties up cash for months, and a slow season can hurt.

Add up the margin a customer is expected to bring in, order by order, until it covers CAC:

expected margin from order k = margin per order × repeat rate^(k − 1)
payback order  = first order where the running total ≥ CAC
payback days   = (payback order − 1) × days between orders
lifetime margin = margin per order ÷ (1 − repeat rate)

• Margin per order: what you keep after product cost, fees and shipping, before ads. The contribution margin calculator works it out for Amazon and Shopify.
• Repeat rate: the chance a customer places their next order. Each later order is a bit less likely, so it adds less expected margin.
• If lifetime margin is less than CAC, the customer never pays back on average, however long you wait.

Some guides divide CAC by monthly margin per customer. That works for subscriptions with steady payments. For products bought now and then, counting order by order is closer to how the money really comes in.

A made-up brand pays $30.00 to win a customer. Each order makes $12.00 of margin, customers reorder about every 45 days, and 70% place each next order. These are the calculator's example values.

1. Order 1 (day 0): expected margin $12.00, running total $12.00.
2. Order 2 (day 45): expected margin $8.40, running total $20.40.
3. Order 3 (day 90): expected margin $5.88, running total $26.28.
4. Order 4 (day 135): expected margin $4.12, running total $30.40.

The running total passes $30.00 on order 4, about 135 days after the first purchase. Over a customer's life, the expected margin is $12.00 ÷ (1 − 0.7) = $40.00, or 1.33× CAC.

If CAC rose to $45.00, lifetime margin of $40.00 would never cover it: the average customer would lose money, however long you wait.

It depends on how much cash you can tie up, but these rules of thumb are common:

• Paid back on the first order: ads pay for themselves right away. You can usually spend more.
• Within about 12 months: a common target. You recover the cash within a year, before most customers drift away.
• Over 12 months: workable only with cash to wait and a repeat rate you trust. A small change in repeat rate can push payback out a long way.
• Never: on average, each new customer loses money. Lower CAC, raise margin, or bring customers back more often.

• Using revenue, not margin. Revenue pays for product cost and fees first. Only margin pays back CAC.
• Counting every customer as new. CAC is spend ÷ new customers. Counting repeat buyers makes CAC look lower.
• Trusting ad-platform CAC. Platforms count customers who would have bought anyway, so their CAC looks cheaper than it is.
• Assuming everyone reorders. A repeat rate of 70% means 30% stop after each order. Leaving that out makes payback look faster.

The CAC that matters is spend ÷ customers your ads caused. If half the customers your ad platform credits would have bought anyway, your real CAC is double what the report says, and so is your payback period.

A holdout test measures caused sales directly. Plan one with the holdout test calculator, and use the max CAC calculator to set a CAC ceiling from your LTV and payback window.

Spillmark runs those tests for Meta ads that drive Amazon sales and keeps each result on record, so your CAC starts from what your ads caused. See how lift is calculated.