LTV:CAC and CAC Payback
When you need this method
You want to know whether your growth machine is healthy before feeding it more money. Revenue growth alone does not answer that: a model can grow while destroying capital on every customer or tying it up for too long. Investors examine exactly these two metrics before funding scale.
Approach
- 1Calculate LTV as (ARPA × 1/churn rate) × gross margin, not on a revenue basis.
- 2Capture CAC fully: media spend, marketing payroll and sales commissions divided by customers won.
- 3Form the LTV:CAC ratio; the target is at least 3.
- 4Calculate CAC payback in months on a gross-margin basis; target under 12 months in SMB, up to 24 in enterprise.
- 5Read both together: below 3 the model needs fixing, well above 3 with short payback suggests underinvestment.
Typical application
A typical case, as an illustrative calculation: a B2B SaaS spends an all-in 10,000 euros to acquire a customer. The customer generates 8,000 euros in annual revenue at 80 percent gross margin, so 6,400 euros of contribution per year, and stays five years on average. LTV is therefore 32,000 euros, the ratio 3.2:1, payback just under 19 months. That works for an enterprise motion; for an SMB business the same payback would be a warning sign, since under 12 months is expected there.
Limits and counter-indications
Averages hide segment differences; calculate by segment and channel, not just in aggregate. For lender and embedded-finance models the SaaS margin logic does not apply; the spread calculation does. The metrics rest on churn assumptions that are still unstable in young companies.
How to measure impact
LTV:CAC ratio (target at least 3) and CAC payback in months on gross margin, reported separately by segment.
Related methods
Sources
- 1.Valuing Customers, Gupta, Lehmann & Stuart, Journal of Marketing Research (opens in a new tab) · American Marketing Association / Columbia Business School (Volltext) · 2004 · academic and scholarly literatureDefiniert den Kundenwert als Summe abgezinster künftiger Erträge aus Marge, Kundenbindung und Akquisitionskosten und beziffert, wie stark diese drei Größen den Unternehmenswert bewegen.
- 2.Scaling to $100 Million, Bessemer Venture Partners (BVP Atlas) (opens in a new tab) · Bessemer Venture Partners · BVP Atlas, o. J. · investment, consulting or analyst firmNennt ein Verhältnis von Kundenwert zu Akquisitionskosten von mindestens 3 als Gesundheitsschwelle und koppelt es an segmentabhängige Rückzahlungsfristen.
- 3.SaaS Metrics 2.0 · Definitionen, David Skok (forEntrepreneurs) (opens in a new tab) · forEntrepreneurs · o. J. · practitioner sourceTrägt die Rechenregel, den Kundenwert auf Bruttomarge statt auf Umsatz zu rechnen, sowie die Richtwerte Verhältnis über 3 und Rückzahlung unter zwölf Monaten.
Origin: Skok
Last reviewed: 2026-07-25 by Dr. Oliver Gausmann