SaaS / Unit economics

SaaS Metrics Calculator: LTV, CAC Payback, LTV/CAC, Rule of 40

Enter revenue per account, gross margin, churn, acquisition cost, growth, and profit margin to get customer lifetime value, the LTV to CAC ratio, CAC payback in months, and the Rule of 40, each with the rule of thumb investors use.

SaaS Metrics Calculator: LTV, CAC Payback, LTV/CAC, Rule of 40: LTV is monthly revenue per account × gross margin ÷ monthly churn: 100 × 80% ÷ 2% = 4,000. Dividing by an acquisition cost of 1,200 gives an LTV to CAC ratio of 3.3, and the cost is earned back in 1,200 ÷ 80 = 15 months of gross profit. The Rule of 40 adds yearly growth and profit margin: 30% + 15% = 45%. Runs 100% locally in your browser with zero server file uploads.

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Customer lifetime value (LTV)4,000average lifetime 50 months
LTV ÷ CAC3.33 or more is the usual target
CAC payback15 monthsof gross margin to earn back acquisition cost
Rule of 4045%40 or more: healthy

LTV = monthly revenue per account × gross margin ÷ monthly churn: at 100 a month, 80% margin, and 2% churn, a customer is worth 4,000 in gross profit over an average 50 months. CAC payback is acquisition cost ÷ monthly gross profit per customer, here 15 months. The Rule of 40 adds growth and profit margin. The reference points are common rules of thumb from SaaS investors, not standards.

The Rule of 40

A software company's revenue growth rate plus its profit margin should be 40% or more: a company growing 60% can lose 20%, and one growing 10% should earn 30%. It became popular among venture investors around 2015.

Simpler LTV

For a lifetime value from average order values and repeat purchases instead of subscriptions, use the customer lifetime value calculator.

How to use it

  1. Enter monthly revenue per account, gross margin, and monthly churn.
  2. Add the acquisition cost, yearly growth, and profit margin.
  3. Read the four metrics and compare them with the reference points.

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Related tools

MRRLifetime ValueBurn and runway

Frequently asked questions

Why use gross margin in LTV?

Revenue is not profit: hosting, support, and payment fees come out first, and what is left pays back the acquisition cost.

What are good values?

Common rules of thumb: LTV at least 3 times CAC, CAC paid back within 12 to 18 months, and growth plus margin of 40% or more.

Is LTV reliable for a young company?

Not very: with little history, churn is uncertain, and LTV = margin ÷ churn swings widely with small changes.

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