Unit Economics Calculator

Calculate LTV, CAC, and other metrics to understand if your business can grow profitably

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SaaS Unit Economics Calculator

Calculate LTV, CAC, and other critical metrics to understand if your business can grow profitably.

Revenue Metrics

$

Monthly recurring revenue divided by number of customers

75%
0%SaaS typical: 70-85%100%

Customer Churn

3%
0%Good B2B: <3%20%
Annual Churn:30.6%
Customer Lifetime:33.3 months

Customer Acquisition Cost

$
LTV:CAC Ratio

2.5:1

Needs Improvement
Lifetime Value

$12,500

CAC

$5,000

Key Metrics

CAC Payback

13.3 months

Needs Attention
Monthly Gross Profit

$375

Customer Lifetime

33.3 mo

ACV

$6,000

Annual Churn

30.6%

Needs Improvement

Unit economics are workable but should be improved for sustainable growth.

Recommendations
  • • Work on improving either LTV (reduce churn, increase ARPU) or reducing CAC
  • • Analyze which customer segments have better economics
  • • Consider pricing adjustments based on value delivered

Want to improve your unit economics?

Learn proven strategies for capital-efficient growth.

Read the Playbook

Understanding SaaS Unit Economics

What is LTV (Customer Lifetime Value)?

LTV represents the total revenue you can expect from a single customer over their entire relationship with your business. It's calculated as:

LTV = ARPU × Gross Margin × Customer Lifetime

A higher LTV means each customer is more valuable, giving you more room to invest in acquisition and support.

What is CAC (Customer Acquisition Cost)?

CAC is the total cost to acquire one new customer. This includes:

  • Marketing costs: Advertising, content creation, events, tools
  • Sales costs: Salaries, commissions, tools, travel
  • Overhead: Allocated portion of related costs
CAC = (Marketing Spend + Sales Spend) / New Customers Acquired

The 3:1 LTV:CAC Rule

A healthy SaaS business typically has an LTV:CAC ratio of at least 3:1. This means you earn $3 for every $1 spent on acquisition. Here's what different ratios indicate:

  • <1:1:You're losing money on every customer. Unsustainable.
  • 1-3:1: Marginal economics. Focus on improving before scaling.
  • 3-5:1: Healthy. You can invest confidently in growth.
  • >5:1: Excellent, but you may be underinvesting in growth.

CAC Payback Period

Payback period tells you how long it takes to recover your customer acquisition investment. It's calculated as:

Payback = CAC / (ARPU × Gross Margin)

Target payback periods:

  • <12 months: Healthy - customers become profitable within a year
  • 12-18 months: Acceptable, but watch carefully
  • >18 months: Concerning - requires significant capital to fund growth

Why Gross Margin Matters

Gross margin is the percentage of revenue left after direct costs (hosting, support, third-party services). For SaaS:

  • 70-85%: Typical for software businesses
  • <70%: May indicate heavy service component or infrastructure costs
  • >85%: Excellent - highly scalable model

How to Improve Unit Economics

If your metrics need improvement, focus on these levers:

  • Increase ARPU: Raise prices, upsell, expand accounts
  • Reduce churn: Improve onboarding, customer success, product value
  • Lower CAC: Optimize channels, improve conversion, leverage referrals
  • Improve margins: Negotiate vendor costs, automate support

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