Why Unit Economics Matter in SaaS
If you're running a SaaS business, you've heard the mantra: LTV > CAC. But do you know your numbers? Most founders I talk to guess their churn rate and hope their unit economics work out. That's a dangerous game.
Your unit economics tell you:
- How much you can spend to acquire a customer profitably
- Whether your business model actually works
- When you'll see a return on your customer acquisition investment
The 5 Metrics You Need to Track
1. Customer Acquisition Cost (CAC) — Total sales & marketing spend divided by new customers. Break this down by channel to see which acquisition channels work.
2. Average Revenue Per Account (ARPA) — Monthly recurring revenue divided by total customers. Track how this changes as you move upmarket.
3. Gross Margin — (Revenue - COGS) / Revenue. For SaaS, this should be 70-90%.
4. Churn Rate — Customers lost / total customers per month. The #1 killer of SaaS businesses.
5. Lifetime Value (LTV) — ARPA × Gross Margin × (1/Churn Rate). With expansion revenue, it's higher.
Why You Need a Spreadsheet
Instead of guessing, I built a SaaS Unit Economics Calculator in Google Sheets. It has:
- Pre-built LTV formulas with expansion revenue and discount rates
- CAC breakdown by channel (paid ads, content, referrals, sales)
- Cohort profitability tracker for 24 months
- Scenario analysis with 3 assumptions sets
- Sample data for 3 company types (SMB, Mid-Market, Enterprise)
The best part? All cells are unlocked and formulas are visible. You can see exactly how each number is calculated.
Real Example
Take a SaaS company with $99/mo ARPA, 5% monthly churn, 75% gross margin, $450 CAC:
- Customer Lifetime: 20 months
- LTV (gross): $1,485
- LTV (net with expansion): $1,815
- Payback Period: 6.1 months
- LTV:CAC Ratio: 3.3x (healthy!)
If you reduce churn from 5% to 3% (by improving onboarding), your LTV jumps to $2,475. That's a 67% increase from one operational change.
Get the Template
I've published the full SaaS Unit Economics Calculator on Gumroad for $29. It includes 4 complete tabs with formulas, sample data, video walkthrough, and step-by-step instructions.
Get the SaaS Unit Economics Calculator →
No affiliation — just a tool I built after helping 20+ SaaS companies run their numbers.
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