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Methodology

CAC Payback Planner methodology

Find when a finite retained-contribution sequence recovers customer acquisition cost.
Duc Nguyen X.By Duc Nguyen X.· Founder, Margin101Last reviewed: View update historyMethodology

Educational only: Business decision support, not accounting, tax or legal advice.

Privacy: Calculations run locally; Margin101 does not receive your commercial inputs.

Update policy: Reviewed when formulas or official dependencies change.

Scope: Market-neutral small-business planning using your own assumptions.

1. Formulas and units

Payback Periods
paybackPeriods = interpolated cumulative contribution crossing

Where

paybackPeriods
Payback Periods (periods)Source: Calculated output
cumulativeContribution
Cumulative Contribution (money)Source: Calculated output
Cumulative Contribution
cumulativeContribution = sum of period contributions

Where

cumulativeContribution
Cumulative Contribution (money)Source: Calculated output
Unrecovered CAC
unrecoveredCac = max(0, CAC − cumulative contribution)

Where

cumulativeContribution
Cumulative Contribution (money)Source: Calculated output
unrecoveredCac
Unrecovered CAC (money)Source: Calculated output
Unrecovered CAC Share
unrecoveredCacShare = unrecovered CAC ÷ CAC

Where

unrecoveredCac
Unrecovered CAC (money)Source: Calculated output
unrecoveredCacShare
Unrecovered CAC Share (percent)Source: Calculated output
Target CAC
targetCac = entered CAC

Where

targetCac
Target CAC (money)Source: Calculated output

Money inputs and outputs use the currency selected in the scenario without changing the canonical methodology. Rates, margins, utilisation and buffers are entered as percentages and converted to decimal values for calculation.

2. Worked example

Input assumptions

Worked values below come from the same registered engine and visible default assumptions.

Calculation and outputs

Example

Worked values below come from the same registered engine and visible default assumptions.

Payback Periods
2.94
Cumulative Contribution
184.46 currency units
Unrecovered CAC
0.00 currency units
Unrecovered CAC Share
0%
Target CAC
120.00 currency units

The exact engine-derived outputs are shown in the labelled rows below.

Interpretation

CAC payback identifies the interpolated period where the finite retained-contribution sequence recovers acquisition cost.

3. Validation and boundary checks

  • All inputs must be finite and non-negative unless the formula explicitly permits a negative calculated profit or gap.
  • Rates must remain between 0% and 100%; horizons and declared counts use the exact whole-number boundaries shown by the inputs.
  • Zero denominators return an explicit unreachable state rather than Infinity, NaN or a numeric sentinel.
  • Compared records must use one consistent attribution, contribution, period and currency basis.

4. Assumptions and source classification

  • Retention, conversion, attribution and incrementality are user assumptions rather than causal claims.
  • Customer value is contribution-based and bounded to the selected finite horizon.
  • No provider rate, market benchmark, country rule or policy constant is embedded.

This planner has no current policy-data dependency. Its commercial assumptions are user supplied. Registered family-level regression suites exercise the shared business-logic engine and worked-result reconciliation.

5. Limitations

  • The workflow does not forecast demand, retention, conversion or campaign performance.
  • It does not replace financial, accounting, tax or legal advice.

This is educational decision support, not tax, accounting, legal or financial advice. Check the treatment of your actual transactions under the rules that apply to your business and seek qualified advice where appropriate.

6. Update and evidence policy

Registered family-level suites test formula invariants and example reconciliation; the release ledger records that coverage without claiming a separate oracle for every line of public copy. There is no official threshold or benchmark to refresh for this planner. Commercial inputs remain user-supplied because they vary by business and contract.

Change history

  1. : Initial public release of the planner and methodology after pre-launch calculation, content, source and interaction review.

Related reading

Guides to interpret the decision and its assumptions.

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