Calculate your Customer Acquisition Cost and Customer Lifetime Value. See your LTV:CAC ratio and payback period to understand if your business model is sustainable.
The industry benchmark for SaaS is 3:1 — customers should be worth 3 times what it costs to acquire them. Above 5:1 suggests you should spend more on growth. Below 1:1 means you lose money on every customer.
CAC = Total sales and marketing spend / Number of new customers acquired. Include all salaries, ad spend, software, events, and agency fees. For example: Rs 1,00,000 spent to acquire 20 customers = Rs 5,000 CAC.
LTV = Average gross profit per customer per month × Average customer lifespan in months. For a SaaS product at Rs 1,000/month with 70% margins and 24-month lifespan: LTV = Rs 700 × 24 = Rs 16,800.
Under 12 months is healthy for most B2B SaaS. Consumer companies often target 6 months or less. Longer payback periods increase cash flow risk — you need more working capital to fund growth.
LTV (Lifetime Value) and CLV (Customer Lifetime Value) are the same metric — both measure the total value a customer brings over their relationship with your business. The terms are used interchangeably.
Improve LTV: increase prices, reduce churn, expand revenue per customer through upsells. Reduce CAC: improve conversion rates, focus on highest-converting channels, use organic/referral acquisition. Both approaches work.
Enterprise software (high LTV due to multi-year contracts, high switching costs), financial services (long-term relationships), and subscription businesses with low churn tend to have the best ratios. E-commerce typically struggles with lower LTV.