| name | unit-economics |
| description | Compute the SaaS unit-economics quartet — CAC, LTV, LTV:CAC ratio, and CAC payback period — and assess whether the business acquires customers profitably. Use when evaluating growth health or comparing acquisition channels. |
The four metrics
- CAC (Customer Acquisition Cost) — total acquisition spend / new customers in the period.
- Fully-loaded CAC includes sales + marketing salaries, tools, ad spend.
- Marketing CAC includes paid media only — useful for channel-level analysis but understates true cost.
- LTV — see ltv-analysis for derivation.
- LTV:CAC ratio — typical SaaS target is ≥3. Below 1 means losing money on each customer; above 5 may indicate underinvestment in growth.
- CAC payback period — months until cumulative gross profit from a customer equals CAC. Typical SaaS targets: <12 months for SMB, <24 for mid-market.
Slicing
The aggregate ratio is often misleading. Always also compute by:
- Acquisition channel — paid vs organic vs referral economics differ wildly
- Segment / plan tier — enterprise customers have higher CAC but much higher LTV
- Cohort — economics drift over time; show the trend
Pitfalls
- Immature cohorts — recent cohorts haven't realized their LTV yet; payback period is the more honest near-term metric.
- Lagged attribution — if customers acquired in month N start paying in month N+3, time-aligning revenue and spend is critical.
- Counting only cash CAC — ignoring fully-loaded cost makes channels look cheaper than they are.
- Using revenue, not gross profit — LTV:CAC must use gross-profit-based LTV to be meaningful.
