How To Calculate Cost of Acquisition Payback in Blackbaud | Arithmix

Calculating the cost of acquisition payback is an important step in determining the profitability of your business. It helps you understand how long it will take for your investment to pay off and start generating profits. In this article, we will discuss what cost of acquisition payback is, when it is valuable to calculate, and how to calculate it.

What Is Cost of Acquisition Payback?

Cost of acquisition payback is a financial metric that measures the amount of time it takes for a business to recover the cost of acquiring a customer. It is calculated by dividing the cost of acquiring a customer by the revenue generated by that customer over a specific period of time. The result is the number of months it will take for the business to recover the cost of acquiring that customer.

For example, if it costs a business $100 to acquire a customer and that customer generates $50 in revenue per month, the cost of acquisition payback would be two months. This means that it will take two months for the business to recover the cost of acquiring that customer.

When Is It Valuable To Calculate Cost of Acquisition Payback?

Calculating the cost of acquisition payback is valuable for businesses that are looking to grow and expand their customer base. It helps businesses understand the return on investment (ROI) of their marketing and advertising efforts. By knowing how long it will take to recover the cost of acquiring a customer, businesses can make informed decisions about how much to invest in customer acquisition.

Additionally, calculating the cost of acquisition payback can help businesses identify areas where they can improve their marketing and advertising strategies. If the cost of acquisition payback is too high, it may indicate that the business is spending too much on customer acquisition or that their marketing efforts are not effective.

How to Calculate Cost of Acquisition Payback

To calculate the cost of acquisition payback, you will need to know the cost of acquiring a customer and the revenue generated by that customer over a specific period of time. The period of time can vary depending on the business, but it is typically one year.

Once you have this information, you can use the following formula to calculate the cost of acquisition payback:

Cost of Acquisition Payback = Cost of Acquiring a Customer / Revenue Generated by that Customer

For example, if it costs a business $100 to acquire a customer and that customer generates $50 in revenue per month, the cost of acquisition payback would be:

Cost of Acquisition Payback = $100 / ($50 x 12) = 0.1667 years or approximately 2 months

By calculating the cost of acquisition payback, businesses can make informed decisions about their marketing and advertising strategies and ensure that they are investing their resources in the most effective way possible.

How Do You Calculate Cost of Acquisition Payback in Blackbaud

Blackbaud itself isn’t naturally geared towards letting you calculate complex metrics like Cost of Acquisition Payback. As an alternative, teams typically use products like Arithmix to import data from Blackbaud and build out dashboards.

What is Arithmix?

Arithmix is the next generation spreadsheet - a collaborative, web-based platform for working with numbers that’s powerful yet easy to use. With Arithmix you can import data from systems like Blackbaud, combine it with data from other systems, and create calculations like Cost of Acquisition Payback.

In Arithmix, data is organized into Tables and referenced by name, not by cell location like a spreadsheet, simplifying calculation creation. Data and calculations can be shared with others and re-used like building blocks, vastly streamlining analysis, model building, and reporting in a highly scalable and easy to maintain platform. Data can be edited, categorized (by dimensions) and freely pivoted. Calculations are automatically copied across a dimension - eliminating copy and paste of formulas.

Arithmix is fully collaborative, giving your entire team access to your numbers and the ability to work together seamlessly.

Calculating Cost of Acquisition Payback in Arithmix

Calculating metrics like Cost of Acquisition Payback is simple in Arithmix. Once you've created your free account, you’ll be able to import your Blackbaud data, and use it to create natural language formulas for metrics like Cost of Acquisition Payback.

Arithmix is designed to give you the power to build any calculations you want on top of your Blackbaud data, while also being easy to use and collaborate on. You can share your dashboards with users inside and outside of your organisation, making it easy to empower your whole team.