CAC payback period

LTV : CAC says whether the customer is worth buying. Payback says whether the company can afford to buy them now. A business can be healthy on the first and insolvent on the second, and the second is what kills it.

Payback is also the number that decides growth rate without financing: a company recycling cash in four months can grow roughly three times faster than the same company at twelve, on identical margins.

Why payback decides the cash position and LTV does not

CAC

AED 400

Revenue per customer per month

AED 84

Gross margin

45 %

Payback = 400 ÷ (84 × 0.45) = 10.6 months. Every customer acquired is ten months of financed cost before they contribute anything, which sets how fast the company can grow without borrowing.

Payback measured on revenue

Dividing CAC by revenue rather than by contribution shortens the apparent payback by exactly the cost of goods — commonly making a ten-month payback read as five, which is the difference between a business that can self-fund growth and one that cannot.

CAC

Everything spent to acquire customers in a period, divided by the number of customers that spending actually produced.

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LTV : CAC

The ratio of what a customer is worth to what they cost — a sanity check on the model, not a target to optimise.

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Contribution margin

What is left of a sale after every cost that exists only because the sale happened.

All forty-five termsWhat this is regulated by in the UAE

Is this one right in your own numbers?

The definitions are the easy part. Whether the figure on your dashboard was computed this way is a different question, and usually the more expensive one.