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Unit Economics Calculator
Know your CAC, LTV, and payback period: the metrics that determine if your SaaS business scales.
Frequently Asked Questions
- What are SaaS unit economics?
- SaaS unit economics measure the profitability of each customer. The key metrics are Customer Acquisition Cost (CAC), Lifetime Value (LTV), LTV:CAC ratio, and payback period. Healthy SaaS businesses target an LTV:CAC ratio of 3:1 or higher.
- How do you calculate CAC?
- Customer Acquisition Cost (CAC) is calculated by dividing total sales and marketing spend by the number of new customers acquired in that period. For example, $100K spend ÷ 50 new customers = $2,000 CAC.
- What is a good LTV:CAC ratio?
- A healthy LTV:CAC ratio is 3:1 or higher, meaning each customer generates 3x more value than it costs to acquire them. Below 1:1 means you lose money on every customer. Above 5:1 may indicate underinvestment in growth.
- How do you calculate customer LTV for a SaaS startup?
- The basic SaaS LTV formula is: Average Revenue Per Account (ARPA) × Gross Margin ÷ Churn Rate. For a $200/mo plan with 80% gross margin and 2% monthly churn: ($200 × 0.80) ÷ 0.02 = $8,000 LTV. Always use gross margin, not revenue alone, because gross profit is what funds acquisition and expansion.
- What is CAC payback period?
- CAC payback period is how many months of gross margin a customer must generate to repay their acquisition cost. Calculated as CAC ÷ (ARPA × Gross Margin). Top SaaS companies target under 12 months; under 24 is acceptable; over 36 is risky unless you have very low churn.
- How are unit economics different for product-led growth (PLG) vs sales-led startups?
- PLG businesses typically have lower CAC (self-serve signup) but lower initial ACV; sales-led businesses have higher CAC but larger initial deals and faster expansion. Compare them on LTV:CAC ratio and payback period; both should clear 3:1 and a 12-month payback respectively, regardless of motion.
- Should I include free-trial users in CAC calculations?
- Only count converted, paying customers in the denominator. Free trials, freemium accounts, and waitlist signups inflate the customer count and understate true CAC. For a more conservative view, calculate paid CAC using only sales and marketing spend that targeted paid acquisition (excluding brand and PR).
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GlossaryCAC (Customer Acquisition Cost)
Fully-loaded cost to acquire one new customer.
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GlossaryLTV (Lifetime Value)
Total gross profit a customer generates over their lifetime.
