Frequently Asked Questions
What are 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.
How do I improve unit economics?
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.
When should I optimize unit economics vs. growth?
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).
Why use contribution margin and not gross margin for LTV?
Gross margin subtracts only COGS. Contribution margin subtracts every per-customer variable cost, including support, per-customer hosting and payment processing. Using gross margin overstates how much each customer actually generates.
What should CAC include?
Fully loaded CAC includes sales and marketing salaries, sales tooling and software, ad spend, agency fees and any other expense directly tied to acquiring customers, divided by the number of new customers won in that period.
What payback period is acceptable?
For SMB SaaS, under 12 months signals capital-efficient growth. Up to 18-24 months can be acceptable for enterprise markets with multi-year contracts. Beyond 24 months requires a lot of capital to scale.
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This calculator provides estimates for informational purposes only. Business results vary by industry, market conditions, and execution. Not a substitute for professional business consulting, accounting, or legal advice. Consult qualified professionals before making business decisions.