Calculating CAC & LTV Accurately 🧮 - SaaS Growth Course

Hi there,

This week I’m covering how to properly calculate CAC and LTV for a SaaS Business – and calculate the all important LTV:CAC ratio.

For your LTV:CAC ratio, target 6:1 for most SaaS firms for the optimal balance between profit and growth (around 4:1 for venture-backed where you’re going for growth at all costs or 8:1 for bootstrapped where profit matters).

Here’s this week’s Loom video and Google slides, both created by Ryan Allis, founder of SaasRise and iContact ($169M exit). To access to all 26 lessons at once, apply to join the community here or log in to your member portal.

Now, let’s jump in to the good stuff… 🔥

Calculating Your CAC & LTV (+ Full Unit Economics) 🧮

Here’s the full video on CAC and LTV, followed by a summary below for easy scanning… feel free to pass this along to your co-founder or Head of Growth.

In the Loom video, I explain how to properly calculate Customer Acquisition Cost (CAC) for a SaaS company as well as all the key unit economics including:

1. CAC - Customer Acquisition Cost

2. ARPA - Average Revenue Per Account (aka ACV)

3. Account Churn - Percentage of accounts who cancel monthly

4. Lifespan - Average months a client stays

5. LTV - Estimated lifetime revenue from a client

6. Payback Months - Number of months of revenue to recoup S&M spend

7. LTV:CAC Ratio - The ratio of how much bigger your average customer value is compared to the cost to acquire a customer, target around 6:1 for most SaaS firms.

Here’s a free template to calculate your own unit economics (copy it and edit) to help you calculate your Target CAC and Target Payback months — so that you know in advance of spending on various marketing channels what your results need to be to allow for scalable 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.

This Week’s Key Slides 🛝

Here are the most important slides we cover in this week’s unit economics lesson…

What’s Coming Via Email Weekly Over the Next 26 Weeks 📅

I’ll be sharing this type of content every Monday for the next six months. If you want access to the full course now, rather than waiting each week to get it, just apply here to join the SaasRise community (all CEOs/Founders of SaaS firms with $1M+ in ARR are invited to join)..

Next week I’ll be covering SaaS Marketing Strategy. 🎯

By the way, here’s what’s the SaasRise community directory looks like… we recently passed 350 members, representing over $2.2 billion in collective ARR. Members can access this via their member portal here.

See you next week with a post on SaaS Marketing Strategy!

-Ryan

Until then,
Ryan Allis, CEO & Founder
SaasRise
www.saasrise.com
The #1 Community for Experienced SaaS CEOs and Founders

About SaasRise Founder Ryan Allis

We’ll see you next time with more great SaaS growth and scaling content!

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