SaaS Metrics Calculator
Four inputs describe the unit economics of any subscription business: what an account pays per month, how much of that survives as gross margin, how fast accounts leave, and what one costs to acquire. This calculator turns them into customer lifetime value, the LTV:CAC ratio, and the number of months needed to earn back an acquisition. The three outputs deliberately answer different questions on different clocks — payback is about the next year of cash, LTV about the whole customer relationship — and the notes below cover which figure to trust when, and which input is worth improving first.
SaaS unit economics
Example: 100/month at 80% margin, 2% monthly churn, CAC 1,200 — LTV 4,000, ratio 3.33, payback 15 months.
What each metric means
Contribution per account is ARPU × gross margin — the monthly gross profit one account generates. In the example, 100 at 80% margin contributes 80 a month; the other 20 is consumed by serving the account. (Unsure of your margin? The profit margin calculator works it out from revenue and cost, and keeps margin distinct from markup.)
Lifetime value (LTV) divides that contribution by the monthly churn rate: 80 ÷ 0.02 = 4,000. Equivalently, a 2% monthly churn rate implies an average customer lifetime of 50 months, and 80 a month for 50 months is the same 4,000. All figures on this page are computed at build time by the identical engine behind the form.
LTV:CAC compares that lifetime gross profit to the 1,200 it cost to acquire the account: 4,000 ÷ 1,200 = 3.33 — each acquisition dollar eventually returns about 3.33 dollars of gross profit. CAC payback asks the nearer-term question — how long until the acquisition cost is earned back — and answers in months: 1,200 ÷ 80 = 15. Payback is the same idea as a return on investment reaching zero, expressed on a clock instead of as a percentage.
The 3:1 convention is a rule of thumb, not a law
A widely circulated venture-capital guideline holds that a healthy subscription business shows an LTV:CAC ratio above about 3. It is a useful screen: below 1, every acquisition destroys money; between 1 and 3, growth spend is recovered but leaves thin cover for the fixed costs that sit outside this model (the break-even calculator handles those). But the guideline is a convention, not a law of arithmetic — and a very high ratio is not automatically a triumph. A ratio of 8 or 10 can mean acquisition channels are being starved: if each marketing dollar reliably returns several, spending too few of them is growth left on the table. Investors often read an extreme ratio as underinvestment, not efficiency.
Why simple LTV overstates for young products
The formula assumes the churn rate you enter holds forever, ARPU never changes, and future gross profit is worth the same as today's. Each assumption flatters the result. Early-tenure customers churn faster than settled ones, so a young product's measured churn understates what its first cohorts will do over a full lifetime; money arriving in year four is worth less than money arriving this quarter, and the simple model applies no discount; expansion revenue may raise ARPU later, but a young cohort has not demonstrated it yet. Treat simple LTV as a first-pass screen and re-measure as cohorts age — the CAGR calculator is the natural companion for tracking how the resulting revenue actually compounds year over year.
The monthly-vs-annual churn trap
Multiplying a monthly churn rate by twelve overstates annual churn, because each month's losses come out of an already smaller base. At 1% monthly, 99% of customers survive each month, and 0.99¹² ≈ 0.886 of them survive the year — an annual churn of 11.36%, not 12%. The gap widens as churn rises: the example's 2% monthly rate compounds to 21.53% annually rather than 24%. The calculator always reports the compounded figure. The same asymmetry works in reverse — an annual rate converts to monthly by a twelfth root, not division by twelve — so never mix monthly and annual rates from different sources without converting properly.
A year of growth against a year of churn
Annual churn is not an abstract statistic — it is the hole next year's new revenue must fill before any of it counts as growth. At the example's 2% monthly churn, 21.53% of the revenue base disappears within twelve months, so a business that merely wants to stand still must add 21.53% of its starting MRR in new sales over the year — slightly more, in fact, since the newly added accounts begin churning too. Nudge churn to 3% monthly — a shift small enough to hide inside one quarter's noise — and the annual hole widens to 30.62%, while LTV falls from 4,000 to 2,666.67 and the LTV:CAC ratio from 3.33 to 2.22 — below the conventional healthy line without pricing, margin, or acquisition cost moving at all. That is why churn deserves obsessive measurement while it still looks small: by the time it shows up in the top-line revenue chart, it has been compounding for months.
Reading CAC payback
Payback months measure risk more directly than the LTV:CAC ratio does, because the ratio leans on lifetime projections while payback only needs the near future to hold. The example's 15 months means each new account is underwater for over a year before contributing anything net — survivable with patient capital, dangerous without. Commonly cited benchmarks treat paybacks under about a year as healthy for SaaS, with the strongest businesses recovering CAC in well under that; the longer the payback, the more cash the business must front to grow, and the more a rise in churn hurts, since more customers leave before ever paying back their acquisition.
Which input is worth improving first
The four inputs do not pull on the three outputs equally, and knowing which output each one moves is the practical value of the model. Rerunning the example three ways, changing one input at a time:
- Halve churn (2% to 1% monthly) — LTV doubles from 4,000 to 8,000 and the ratio from 3.33 to 6.67, yet payback stays at exactly 15 months, because churn appears nowhere in the payback division. A retention program can transform long-run economics while doing nothing visible to near-term cash recovery.
- Cut CAC by a quarter (1,200 to 900) — payback drops to 11.25 months and the ratio rises to 4.44, yet LTV is untouched at 4,000, because what a customer is worth has nothing to do with what one cost to find.
- Raise ARPU by a quarter (100 to 125, margin and churn unchanged) — the only single move that improves all three outputs at once: LTV 5,000, ratio 4.17, payback 12 months. Pricing feeds the monthly contribution, and the contribution sits inside every formula on this page.
The decision rule falls out directly. If the pressing constraint is cash — runway, how long acquisition dollars stay underwater — work on CAC or price, the only inputs payback can see. If the constraint is long-run viability, work on churn, which owns LTV almost by definition. And never judge a retention effort by the payback number: the model guarantees it will not move.
Frequently asked questions
What goes in the "revenue per account" field?
The average monthly recurring revenue per paying account — total MRR divided by the number of accounts. Annual contracts should be divided by twelve first, and one-time setup fees left out, because every other figure here is a monthly rate.
Why does the calculator refuse a churn rate of zero?
The simple LTV formula divides the monthly contribution by the churn rate, so zero churn would declare every customer infinitely valuable. No real product keeps every customer forever; if churn is genuinely tiny, enter the small positive rate you actually measure and read the large-but-finite result with appropriate suspicion.
Is a 3:1 LTV:CAC ratio a requirement?
No — it is a widely circulated rule of thumb, not a law. Below about 1, each acquisition destroys money outright. Around 3, acquisition spend is generally considered sustainable. But a very high ratio is not automatically good news either: it can mean the business is underspending on growth that would pay for itself. The example inputs land at 3.33.
Is 1% monthly churn the same as 12% per year?
No. Churn compounds on a shrinking base: after the first month only 99% of customers remain, so the second month's 1% removes slightly fewer customers than the first. Over twelve months, 1% monthly works out to 11.36% annually — computed as 1 − (1 − 0.01)¹², not 1% × 12.
Why is LTV based on gross margin rather than revenue?
Because serving a customer costs money — hosting, support, payment processing. A customer paying 100 a month at an 80% gross margin contributes 80 toward everything else, and it is that 80, not the 100, that eventually repays the acquisition cost. Revenue-based LTV flatters every figure downstream of it.
Why does cutting churn not improve CAC payback?
Because payback divides CAC by the monthly contribution — 1,200 ÷ 80 = 15 months in the example — and churn appears nowhere in that division. Halving the example's churn doubles LTV from 4,000 to 8,000 yet leaves payback at 15 months. Payback measures how fast one surviving account repays its cost; churn decides how many accounts survive long enough to finish repaying.
Figures are processed locally and never transmitted. This is an arithmetic tool using the deliberately simple constant-churn model, not a valuation or investment advice — it reports what your four inputs imply, nothing more. Implementation details are on the methodology page.