---
title: "Allowable CAC: definition, formula and example"
description: "The most you can pay to acquire a customer and still be paid back by a chosen month. A ceiling for the ad account, set by the offer."
url: https://offersuite.io/glossary/allowable-cac
updated: 2026-10-13
---

# Allowable CAC

The most you can pay to acquire a customer and still be paid back by a chosen month. A ceiling for the ad account, set by the offer.

## In plain words

Allowable CAC is the highest acquisition cost at which a customer still pays back within the time you can wait. It is the customer's cumulative margin by that month: spend more than that to win them, and they have not paid you back by then.

It gives the people buying ads a number that comes from the offer. A longer wait allows a higher cost, because more renewals count. So the first decision is the wait: how many months of acquisition spend you can carry.

## Formula

- Allowable CAC by month m = a customer's expected cumulative margin through month m

## Worked example

To be paid back on the first order alone, a coffee subscriber may cost no more than $3.79: the first order's whole margin. To be paid back by month three, the engine's ceiling is $24.06.

Wait six months and it is $37.10. Wait twelve and it is $53.28. The offer is the same in each case, and only the wait has changed.

### The example order

A $40.00 bag of coffee, shipped free, every cost counted

Revenue $40.00 to contribution margin $15.36 (38.4%)

Revenue

$40.00

Cost of goods

−$12.00

Pick and pack

−$1.18

Packaging

−$0.50

Shipping label

−$7.50

Card fee per order

−$0.30

Refunds

−$2.00

Card processing

−$1.16

Contribution margin

$15.36

2 declared kinds cost nothing on this option

Computed by the margin engine in Offer Suite's own code, in whole cents, from a $40.00 bag of coffee with a $12.00 unit cost.

## Allowable CAC is not a target

It is the cost at which you break even by the chosen month, with nothing left over. Buying customers right at the ceiling earns nothing within that horizon. Aim well below it, and treat the ceiling as the point where a campaign gets switched off.

## Using it

Set the payback month from your cash position first, then read off the ceiling. Give it to whoever runs acquisition per offer: an offer with a richer first order can afford a higher cost. Recompute it when the offer, the costs or the renewal rates change, because the ceiling moves with all three.

## In Offer Suite

Offer Suite's simulator solves for the highest acquisition cost at which the average customer of an offer pays back by a given month, and says so when even a cost of zero would not.

Source: Offer Suite's offer simulator.

## Related

- [Glossary **Glossary of offer economics** The terms behind offer profit, defined plainly with their formulas and a worked number: contribution margin, profit per visitor, break-even lift and more.](https://offersuite.io/glossary)
- [Calculator **Subscription payback calculator: CAC and churn** How much a subscriber's first order loses against what you paid to acquire them, how many renewals it takes to earn that back with churn, and in which month.](https://offersuite.io/calculators/subscription-payback)
- [Calculator **Subscription intro offer calculator** Subscribe and save, a discount on the first order, a free trial or a free product: each as a cohort of subscribers with the same costs, ranked on profit per visitor after acquisition.](https://offersuite.io/calculators/subscription-intro-offer)
- [Glossary **Customer acquisition cost (CAC): definition** What it costs to win one new customer: spend divided by customers won, or the cost of a visitor divided by the share of visitors who buy.](https://offersuite.io/glossary/customer-acquisition-cost)
- [Glossary **CAC payback period: definition, formula and example** How long a customer takes to earn back what they cost to acquire. With churn counted, it is later than the simple division suggests.](https://offersuite.io/glossary/cac-payback-period)
- [Glossary **Goal seek: definition, formula and example** Working backwards from a target to the input that reaches it: the price, acquisition cost or renewal rate at which a plan pays back.](https://offersuite.io/glossary/goal-seek)