SaaS Unit Economics

Per-customer profitability metrics: CAC, LTV, payback period, gross margin, contribution margin. Healthy: LTV:CAC 3:1+, CAC payback <12 months, gross margin >75%. Negative unit economics ("burn for growth") only works if you can prove improvement at scale.

Reduce CAC (better targeting, organic channels), increase ARPU (move upmarket, add features), reduce churn (better onboarding, customer success), improve gross margin (infrastructure efficiency, automation). Each lever amplifies the others.

Unit economics first if: capital is expensive, market is mature, or competitors are profitable. Growth first if: winner-take-all market, network effects, or you have abundant capital. Most companies eventually need both ("efficient growth" frontier).

LTV (lifetime value) is the total gross profit you expect to earn from one customer over the entire relationship with the business. It is calculated as monthly gross profit multiplied by the customer's estimated lifetime in months.

Payback period (months) = CAC ÷ monthly gross profit per customer. If CAC is $1,000 and monthly gross profit is $74, payback takes 13.5 months.

Below 1, each customer you acquire produces a net loss. Between 1 and 3 it is marginal and risky to scale. At 3 or above, the business can invest in growth with confidence.

For SMB SaaS, 5-7% annual churn is common. For enterprise SaaS it is often below 1% annual. Monthly churn above 3% is a serious warning sign.

This calculator focuses on a single cohort of subscribers at a fixed price. The SaaS metrics dashboard uses the real ARPU across the whole active customer base and the real monthly gross churn, which produces more accurate figures for businesses already up and running.