SaaS Executive Summary

The Golden Ratio: A healthy subscription business targets an LTV : CAC ratio ≥ 3.0x.
CAC Payback Target: B2B SaaS target CAC payback is < 12 months; B2C subscription target is < 5 months.
Net Revenue Retention (NRR): Expansion revenue (upsells, seat additions) should ideally exceed churned MRR (NRR > 100%).
Customer Half-Life Formula: Half-Life (months) = ln(0.5) / ln(1 - Churn Rate).

1. Defining SaaS Unit Economics

Unlike traditional one-off transactional retail, recurring revenue SaaS platforms incur heavy upfront acquisition costs (sales headcount, paid marketing, onboarding support) to win a subscriber whose revenue is realized incrementally over many months or years.

If a SaaS company spends $600 to acquire a customer paying $50/month with a 5% monthly churn rate, that customer stays an average of 20 months—generating $1,000 in gross lifetime revenue. After accounting for gross margins (80%), gross lifetime profit is $800, yielding a clean 1.33x LTV:CAC ratio.

2. Essential SaaS Formulas & Calculations

Customer Lifespan (Months)

Lifespan = 1 / Monthly Logo Churn %

If monthly churn is 2.5%, average customer lifespan = 40 months.

Customer Lifetime Value (LTV)

LTV = ARPU × Gross Margin % × Lifespan

ARPU = Average Monthly Revenue Per User.

3. Interactive SaaS Calculators

Use our dedicated SaaS models to analyze your subscription metrics:

LTV & CAC Planner

Map out lifetime value, payback months, and CAC efficiency.

SaaS Churn Calculator

Compute logo churn %, net revenue churn, and customer half-life.

Paywall Converter

Analyze trial-to-paid conversion % and MRR growth.