SaaS Unit Economics for Founders: CAC, LTV, ARPU and Payback
A founder-friendly guide to the small set of SaaS metrics that shows whether growth is creating durable gross profit or consuming cash.
Revenue growth looks healthy only when the economics underneath it are healthy. Four metrics give founders a fast first view: ARPU, customer acquisition cost, lifetime value, and CAC payback.
ARPU: revenue per active customer
Monthly ARPU = MRR ÷ active customers
If monthly recurring revenue is AED 100,000 from 250 customers, ARPU is AED 400. Segmenting ARPU by plan or customer type is more useful than relying only on the blended average.
CAC: the cost to win a customer
CAC = sales and marketing spend ÷ new customers acquired
Use costs and acquisitions from the same period. A fuller CAC includes paid media, sales salaries, commissions, tools, agencies, and attributable content costs. Excluding sales payroll can make acquisition look artificially efficient.
LTV: expected gross profit over a customer life
A common quick model is:
LTV = monthly ARPU × gross margin % ÷ monthly customer churn %
At AED 400 ARPU, 80% gross margin, and 4% monthly churn, the estimate is AED 8,000. This formula assumes a stable churn rate. It is directional and becomes less reliable when cohorts behave differently or churn is volatile.
LTV:CAC and CAC payback
LTV:CAC compares estimated gross-profit value with acquisition cost. A 3:1 result means the model expects three dirhams of lifetime gross profit for each dirham spent acquiring the customer.
CAC payback asks a cash question:
CAC payback months = CAC ÷ monthly gross profit per customer
A business can show an attractive LTV:CAC ratio and still face a cash squeeze if payback is slow. That is why both measures belong in the same review.
Use the free SaaS Unit Economics Calculator to calculate all five outputs together.
Review by cohort, not only as a company average
Blended metrics can hide important differences. Compare customers by acquisition month, channel, plan, geography, and company size. A channel with low CAC but high early churn may be worse than a more expensive channel that retains customers for years.
A useful monthly founder review
Ask four questions:
- Did CAC change because spend changed or conversion changed?
- Did payback improve because ARPU or gross margin improved?
- Is churn concentrated in a plan, cohort, or onboarding path?
- Are expansion and referrals lowering the effective cost of growth?
The point is not to celebrate a benchmark. It is to find the operating lever that changed and decide what to do next.