Unit Economics Calculator: LTV, CAC & Payback for SaaS and DTC Startups

Free tool by AAJ — By Saroj Jha, Founder — Last updated June 2026

AAJ's Unit Economics Calculator computes Customer Acquisition Cost (CAC), Lifetime Value (LTV), the LTV:CAC ratio and CAC payback period for both subscription (SaaS) and transactional (DTC) businesses, with plain-English definitions and the formulas shown alongside.

Use the calculator at aajconsult.com/tools/unit-economics-calculator. For sizing your overall marketing spend, see the Marketing Budget Calculator and the underlying Marketing Budget Benchmarks 2026 report.

What are unit economics?

Unit economics measure the profit a single customer generates against what it costs to acquire them. The two anchors are CAC (the cost to win a customer) and LTV (the gross profit that customer returns over their lifetime). Healthy unit economics mean LTV comfortably exceeds CAC; when it doesn't, scaling spend multiplies losses.

What is a good LTV:CAC ratio?

A good LTV:CAC ratio is about 3:1 or higher. A ratio below 1:1 means you lose money on every customer you acquire. David Skok's SaaS Metrics 2.0 puts the best SaaS businesses above 3:1, sometimes as high as 7 or 8. A very high ratio can also mean you could afford to spend more on acquisition; that is AAJ's reading, not a published threshold.

What is a good CAC payback period?

For SaaS, recovering CAC in under 12 months is the usual target. Payback is how many months of gross profit it takes to recover what you spent acquiring a customer. Bessemer Venture Partners' targets by customer segment are under 12 months for SMB, under 18 for mid-market and under 24 for enterprise. The shorter it is, the less cash you tie up and the faster you can reinvest.

Why does LTV use gross margin instead of revenue?

Because a dollar of revenue you don't keep isn't worth acquiring. LTV is calculated on gross margin — revenue minus the direct cost of serving the customer — so it reflects real profit, not top-line revenue. Bessemer's guidance for cloud companies is to aim for 65–70% or more over time; physical-product and DTC margins are usually lower.

How to calculate CAC, LTV, and payback

Customer Acquisition Cost (CAC)

The fully-loaded cost to acquire one customer: total sales and marketing spend over a period, divided by the customers won in that same period. Formula: CAC = (Marketing spend + Sales spend) ÷ New customers.

Lifetime Value (LTV)

The total gross profit a customer generates across their entire relationship with you. Formula: LTV = Monthly revenue × Gross margin × Avg. lifetime (months). For subscriptions, average lifetime equals 1 ÷ monthly churn.

LTV : CAC ratio

How many times over a customer repays their acquisition cost. Formula: LTV : CAC = LTV ÷ CAC. Below 1:1 you lose money on each customer, 1–3:1 is not yet sustainable, around 3:1 is healthy, above 5:1 is strong.

CAC payback period

How many months of gross profit it takes to recover what you spent acquiring a customer. Formula: CAC payback (months) = CAC ÷ (Monthly revenue × Gross margin). For SaaS, under 12 months is the usual target; Bessemer allows under 18 for mid-market and under 24 for enterprise.

Gross margin, churn & expansion

Gross margin is the share of revenue remaining after the direct cost of delivering your product (hosting, support, product cost, shipping, payment fees). Monthly churn is the share of customers who leave each month; its inverse is the average customer lifetime. Expansion revenue (upsell and cross-sell) offsets churn — when expansion meets or exceeds churn (net-negative churn), lifetime value is effectively unbounded; the model caps it at 120 months to stay realistic.

Unit economics benchmarks

LTV:CAC ratio: 3:1 or higher; David Skok puts the best SaaS businesses above 3:1, sometimes 7 or 8. Below 1:1 means losing money per customer.

CAC payback period: under 12 months for SMB, under 18 for mid-market and under 24 for enterprise (Bessemer); longer payback strains cash flow.

Gross margin: aim for 65–70% or more over time, with the middle half of cloud companies at roughly 60–80% (Bessemer); lower for physical-product and DTC businesses.

Monthly churn: lower is better; net-negative churn (expansion exceeds churn) is best-in-class.

How to use this calculator

Step 1 — Pick your model: Subscription (SaaS) or Transactional (DTC). Step 2 — Enter acquisition costs: monthly marketing spend, sales spend, and new customers. Step 3 — Enter revenue and margin: revenue per customer (or order value and frequency) and gross margin. Step 4 — Enter retention: monthly churn, or average customer lifespan for transactional. Step 5 — Read your results: CAC, LTV, the LTV:CAC ratio with a health verdict, and your payback period.

Frequently asked questions

What are unit economics?

What is a good LTV:CAC ratio?

David Skok's SaaS Metrics 2.0 puts the best SaaS businesses above 3:1, sometimes as high as 7 or 8, so about 3:1 or higher is the usual target. Below 1:1 you lose money on every customer. A very high ratio can also mean you could afford to spend more on acquisition; that is AAJ's reading, not a published threshold.

How do you calculate CAC?

Customer Acquisition Cost (CAC) equals total sales and marketing spend over a period divided by the number of new customers won in that same period. Include sales costs for a fully-loaded figure, or exclude them for a paid-marketing-only CAC.

How do you calculate customer lifetime value (LTV)?

LTV equals monthly revenue per customer multiplied by gross margin, multiplied by the average customer lifetime in months. Always calculate LTV on gross margin, not revenue. For subscriptions, average lifetime equals 1 divided by the monthly churn rate.

What is a good CAC payback period?

CAC payback is the number of months of gross profit it takes to recover the cost of acquiring a customer. David Skok's guidance is that profitability suffers once payback runs past 12 months. Bessemer Venture Partners' targets by customer segment are under 12 months for SMB, under 18 for mid-market and under 24 for enterprise. Longer payback ties up cash and strains growth.

What is the difference between LTV and CAC?

CAC is what you spend to acquire a customer; LTV is the gross profit that customer returns over their entire relationship with you. Comparing the two (the LTV:CAC ratio) tells you whether growth is profitable.

What is a good gross margin for a SaaS business?

Bessemer Venture Partners' guidance for cloud companies is to aim for 65 to 70 percent gross margin over time; the middle half of cloud businesses sit at roughly 60 to 80 percent. Physical-product and DTC businesses are usually lower because product, shipping, and payment costs are higher. LTV should always be calculated on gross margin.

How is the LTV:CAC ratio calculated?

Divide lifetime value by customer acquisition cost: LTV ÷ CAC. The result is how many times over a customer repays their acquisition cost.

Sources

David Skok, SaaS Metrics 2.0 (For Entrepreneurs) - LTV:CAC and CAC payback. Bessemer Venture Partners, Scaling to $100 Million (2021) - CAC payback by segment and cloud gross margin. SaaS Capital, 2026 Spending Benchmarks for Private B2B SaaS Companies - marketing spend.

Related resources

Marketing Budget Calculator — Marketing Budget Benchmarks 2026 report — B2B Analytics & Attribution Playbook — Growth marketing services

Numbers not where you want them?

AAJ helps Seed–Series B startups raise LTV and bring CAC down with a measurement-led growth system. Book a free strategy call and walk away with a clear recommendation.

Run this in your agent

The same method runs as the free AAJ agent skill Unit Economics & LTV:CAC, so a coding agent can do this work with your own data. Install it with npx skills add sarojkjha/aaj-marketing-skills --skill unit-economics.

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