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.

Free Tool

Unit Economics Calculator

Know your CAC, LTV, and payback period — the metrics that determine if your SaaS business scales.

Unit Economics Calculator

Adjust inputs to analyze your customer acquisition economics

S&M Spend ($/mo)New Customers / MoARPU ($/mo)

Monthly Churn (%)Gross Margin (%)

CAC vs LTV

Customer acquisition cost compared to lifetime value

LTV:CAC Ratio

Target is 3x or higher for sustainable growth

6.0x

LTV:CAC Ratio

<1x Critical1-3x Caution>3x Healthy

Healthy

Payback Period

Months to recoup customer acquisition cost

3.3 months

0 mo12 mo18 mo24 mo

<12mo Good12-18mo Fair>18mo Poor

Unit Economics Summary

Key metrics at a glance

CAC (Cost to Acquire)
$500
LTV (Lifetime Value)
$3,000
LTV:CAC Ratio
6.0x
Payback Period
3.3 months
Monthly ARPU
$200

CAC

$500

LTV

$3,000

LTV:CAC

6.0x

Payback

3.3 mo

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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.

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