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CAC and payback

What it costs to win a customer, and how long to earn it back.

Customer acquisition cost (CAC) is what you spend to win one customer. Payback is the months of gross profit needed to earn that cost back. A go-to-market motion has to fit the deal size, the difficulty of the purchase and who is buying.

Illustration: a tool costs USD 1,500 a year. A seller costs USD 24,000 a year and closes 12 deals, so winning one customer costs USD 2,000, more than the customer pays in year one. No amount of hustle fixes that. The way of selling does not fit the deal size.

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