CAC is a Lie: Why You Need a ‘Time-to-Margin’ TTM Metric

In partnership with

Read time: 3 minutes.

Welcome to the 163rd edition of The Growth Elements Newsletter. Every Monday and sometimes on Thursday, I write an essay on growth metrics & experiments and business case studies.

Today’s piece is for 8,000+ founders, operators, and leaders from businesses such as Shopify, Google, Hubspot, Zoho, Freshworks, Servcorp, Zomato, Postman, Razorpay and Zoom.

Today’s The Growth Elements (TGE) is brought to you by:

Unlocking Incrementality: A Guide for Marketing Success

In today's chaotic marketing landscape, brands need a reliable way to measure what works and what doesn't. Incrementality is the answer.

This free ebook, “Unlocking Incrementality: A Guide for Marketing Success,” will teach you everything you need to know about incrementality, from the basics to advanced strategies.

Inside, you’ll learn:

• ‍What incrementality is and why it matters: Understand how it differs from traditional attribution and why it’s essential for modern marketers.

• ‍How to measure and test incrementality: Explore proven methods like geo experiments and conversion lift testing.

• ‍How to optimize your marketing spend: Identify your most impactful channels and allocate your budget with confidence.

• ‍Real-world success stories from top brands: See how leading brands use incrementality to drive growth and improve ROI.

Download now and start making smarter marketing decisions today

^{Thank you for supporting our sponsors, who keep this newsletter free.}

CAC is worshipped in SaaS. But CAC without context is a vanity metric.
It tells you how much it cost to get a customer.
Not whether that customer ever made you money.

That’s why I stopped asking, “What’s your CAC?”
And started asking: “How long does it take to make a margin on this customer?”

Here’s what most teams miss:

[1] CAC only tells you about the start of the journey.

You spend $300 to acquire a user. Great.
But then:

• Their onboarding takes 14 days

• Their first invoice is $29

• Their support usage spikes

• They churn within 6 months

Congratulations, you acquired a loss.

[2] Payback period is closer. But still not enough.

Yes, payback tells you when your CAC is earned back.
But that’s gross, not net.
And it doesn’t show when the customer becomes contribution positive.

You know what matters more?

Time-to-Margin:
How long does it take for a customer to pay back CAC, COGS, and ops overhead, and actually start generating net cash?

[3] Most SaaS teams are still measuring CAC like it’s 2018.

The real levers today:

• Free-to-paid lag time

• Onboarding cost per user

• Support cost per segment

• Time to cross-sell or upsell

• Margin per account by cohort

A $150 CAC might be great…
Until you realise that the user costs $180 to support in month one.

[4] Let’s borrow from HubSpot’s early freemium motion

• CAC was extremely low due to organic traffic.

• But their onboarding lag was long, and customer support costs were high.

• Until they redesigned onboarding to get users publishing in <3 days, CAC payback didn’t guarantee margin-positive cohorts.

Lesson: Great CAC on paper. Losses on the P&L.

[5] Look at Superhuman’s onboarding model

• High CAC due to white-glove setup.

• But their users convert at a premium price with minimal churn.

• Because the TTV is <15 minutes and margins are strong, they hit net contribution quickly.

Lesson: High CAC is fine if Time-to-Margin is fast.

[6] Contrast with Freshworks’ pre-IPO CAC issues

• High ad spend + weak upsell motion = slow CAC recovery.

• Public markets penalised them not for CAC, but for weak margin velocity.

Lesson: VCs tolerated CAC. Wall Street didn’t.

Reframe

Takeaway

CAC is a number.
Time-to-Margin is a strategy.

Don’t just acquire customers.
Acquire profit as fast as possible.

That's it for today's article! I hope you found this essay insightful.

Wishing you a productive week ahead!

I always appreciate you reading.

Thanks,
Chintankumar Maisuria