SaaS
What Gross Margin Should I Use in CAC Payback Period? | SaaS Metrics School | Gross Margin
•January 5, 2026
Original Description
What gross profit should you use in the CAC Payback Period?
This is one of the most common—and most misunderstood—questions in SaaS finance. In today’s episode of SaaS Metrics School, we break it all down so SaaS operators, founders, and finance leaders can calculate CAC payback correctly, make better decisions, and avoid misleading metrics.
CAC Payback Period is one of the most important metrics used by SaaS operators, CFOs, and investors. It’s a must-have metric in your SaaS financial dashboard. But here’s the problem: many teams calculate it using the wrong gross margin, which can completely distort how efficient your go-to-market motion really is.
This episode was inspired by a real question from a reader of my SaaS finance blog:
What gross margin should be used in the CAC Payback Period?
Is it the gross margin from new customers?
Is it the total company gross margin?
It’s a great question—and the answer has more nuance than most people realize.
In this lesson, you’ll learn why CAC Payback Period must be gross-margin adjusted, and why the gross margin you use must directly match the revenue stream you’re measuring. We walk through how CAC payback is calculated using Average Contract Value (ACV), Average Revenue Per Account (ARPA), or Average MRR, multiplied by the correct gross margin for that specific revenue stream.
If you’re landing subscription customers, you must use subscription gross margin. If your customers also generate usage-based revenue, that introduces another layer—because now you may need multiple gross margin calculations inside a single CAC payback analysis.
❖ Why blended company-wide gross margin breaks CAC payback
❖ How multiple revenue streams (subscription, usage, services, hardware) impact CAC efficiency
❖ Why CAC payback must have a one-to-one relationship between revenue and gross profit
❖ How segmented CAC payback applies to larger SaaS companies, multiple products, and business units
❖ Why many large SaaS companies should have 3–5 CAC payback periods instead of just one
This is where things often go wrong as SaaS companies scale. I’ve seen large SaaS organizations reporting a single CAC Payback Period when they should be reporting several—by product line, customer segment, or business unit. When this structure isn’t set up early, companies accumulate what I call accounting debt, similar to technical debt.
Just like technical debt slows down engineering teams, accounting debt slows down finance teams, leadership decision-making, and investor reporting. That’s why having the right SaaS accounting foundation is critical—especially for high-growth SaaS and AI companies.
If you want your CAC Payback Period to be reliable, actionable, and investor-grade, you must:
✓ Match CAC to the correct revenue stream
✓ Apply the correct gross margin to that revenue
✓ Segment CAC payback as your business scales
✓ Avoid blended metrics that hide true unit economics
This lesson applies not only to CAC payback, but to many other SaaS metrics as well. Precision matters. Structure matters. And getting this right early will save you significant pain later as your company grows.
If you want to go deeper, I cover this topic—and many others—in detail on my blog and inside my SaaS metrics courses.
And if you ever have a question about SaaS metrics, financial metrics, CAC, LTV, gross margin, or unit economics, feel free to email me directly at ben@thesaascfo.com
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Thanks for hanging out with me today in SaaS Metrics School. I appreciate you being here—and I’ll see you in the next lesson.
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