Lesson 2 of 30: How To Calculate Your CAC & LTV (And Full Unit Economics) 🧮

In this SaaS growth lesson, I explain the crucial metrics for calculating Customer Acquisition Cost (CAC) and maximizing revenue growth using the science of Unit Economics.

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» Lesson Slides Here

I delve into key concepts like ARPA, account churn, and Lifetime Value (LTV), providing formulas and strategies for determining which channels are working, and scaling up those that are cost effective.

I talk about the five most important SaaS metrics and provides a template to calculate these metrics in our standardized format.

• CAC - Customer Acquisition Cost
• ARPA - Average Revenue Per Account (aka ACV)
• Account Churn - Percentage of accounts who cancel monthly
• Lifespan - Average months a client stays
• LTV - Estimated lifetime revenue from a client
• Payback Months - Number of months of revenue to recoup S&M spend
• LTV:CAC Ratio - Target 6:1 for most SaaS firm

We also break down how to calculate your Target CAC and Target Payback months — so that you know in advance of spending on outbound prospecting and paid advertising what your results need to be to allow for sustainable and repeatable revenue growth.

You can also get these figures calculated for you by syncing up your billing or accounting system onto ProfitWell or SaaSGrid (free) or on a free trial of ChartMogul or Baremetrics. Just load in the data and wait a few hours for it to sync. Stripe also can provide a good enough LTV estimate if you bill only via cards.

Homework: Use this Unit Economics Sheet (make a copy) to calculate your company’s unit economics in our standard format

We'll see you next time with more killer SaaS growth and scaling content.

In the meantime, check out our upcoming live 16 week Done-With-You B2B SaaS Growth Program, designed to be the best program for scaling B2B SaaS firms from $1M to $100M in ARR by building a predictable revenue machine and combining ABM lead list building with AI personalized outbound with scalable digital advertising.

All the best,
Ryan

Ryan Allis, CEO & Founder
SaasRise - The Community for SaaS CEOs & Founders
www.saasrise.com |  Austin, TX

P.S. - Be sure check out GrowthRise, our new mastermind community for B2B Marketing & Sales Leaders at www.growthrise.com where we teach how to rapidly scale up revenue within a B2B firm. Send your Head of Marketing, Growth, or Sales to join us and we'll take good care of them!

About the Author:
Ryan Allis is the CEO and co-founder of SaasRise, the community for SaaS CEOs & founders, and GrowthRise, the comunity for B2B Marketing & Sales Leaders. Ryan founded and grew iContact as CEO to $50M ARR, sold it for $169M, and earned his MBA from Harvard Business School. Today, Ryan coaches SaaS CEOs in rapidly scaling up revenue, building their teams, and preparing for and executing on $100M+ exits.