unit-economics

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

1. 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.
2. LTV — see ltv-analysis for derivation.
3. LTV:CAC ratio — typical SaaS target is ≥3. Below 1 means losing money on each customer; above 5 may indicate underinvestment in growth.
4. 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.