Take everything you spent on sales and marketing in a period, divide it by the number of new customers you won in that period, and you have CAC. Then divide CAC by the monthly gross profit one of those customers brings in, meaning their monthly revenue times your gross margin, not their revenue. The answer is how many months it takes to earn back what you spent to get them. Under twelve months is the usual bar for SaaS and the best companies are under six. Two mistakes to avoid: leaving out salaries and only counting ad spend, and using revenue instead of gross profit, which flatters the number by roughly a third.
5 resources, 1 India-specific, 5 link-checked.
Two Indian investors walking through the bad maths they see most often in founder decks, including why they push founders from LTV to payback. Calibrated to Indian company sizes rather than US ones.
On Prime Venture Partners by Shripati Acharya and Amit Somani 40 min
Three minutes of a SaaS CFO doing the calculation on screen, including the gross margin step most founders skip. If you have no finance team, this is the whole method without the jargon.
On The SaaS CFO by Ben Murray 3 min
The formula reference: CAC, months to recover CAC, magic number, net MRR churn and NRR, each with the calculation spelled out. Bookmark it and stop arguing about arithmetic.
From For Entrepreneurs by David Skok 20 min read
Organises metrics by company stage instead of dumping all of them on you at once, which is exactly what a founder tracking numbers for the first time needs.
From Chargebee by Chargebee 25 min read
The piece that set the vocabulary the whole industry now uses for LTV, CAC and churn, still the best single explanation of why a SaaS business is measured differently. Long, but you only need to read it once.
From For Entrepreneurs by David Skok 45 min read
How forecasting and gtm metrics reads from a different seat.
