⚠️ Your LTV:CAC ratio is under the critical 3.0x baseline. You must either reduce customer acquisition spend (CAC) or optimize your monetization layers to raise Average Revenue Per User (ARPU).
About this tool
SaaS Unit Economics represent financial models utilized by startup founders and web entrepreneurs to calculate business profitability and customer acquisition costs.
LTV & Runway Economic Formulations
Customer Lifetime Value (LTV) maps the projected total revenue generated from a single user based on ARPU and Churn:
The LTV to CAC ratio measures acquisition efficiency:
Our Runway calculator helps you monitor cash burn rates and project overall business survival timelines.
Frequently asked questions
Everything you need to know about SaaS Metrics & Runway Simulator.
How is LTV (Lifetime Value) calculated?
LTV is calculated as: Average Revenue Per User (ARPU) ÷ Monthly Churn Rate. For example, if ARPU is $50 and monthly churn is 5%, LTV = $50 ÷ 0.05 = $1,000. The simulator also supports the gross margin-weighted LTV formula: (ARPU × Gross Margin) ÷ Churn Rate.
What is a healthy LTV:CAC ratio for a SaaS business?
The industry benchmark is 3:1 or higher — meaning you earn at least $3 in lifetime value for every $1 spent acquiring a customer. Ratios below 1:1 mean you are losing money on every acquisition. Elite SaaS companies target 5:1+, though higher ratios can also indicate underinvestment in growth.
What is the difference between MRR and ARR?
MRR (Monthly Recurring Revenue) is the normalised monthly value of all active subscriptions. ARR (Annual Recurring Revenue) is simply MRR × 12. ARR is used for investor reporting and benchmarking, while MRR is more useful for tracking month-to-month growth and churn.
How does the runway calculator work?
Runway (months) = Current Cash ÷ Monthly Burn Rate. Monthly burn rate is your total monthly expenses minus revenue. The simulator lets you model burn rate changes (hiring, new contracts) to see how they affect runway — helping you plan fundraising timing.
How do I calculate monthly churn rate?
Monthly Churn Rate = (Customers Lost in Month ÷ Customers at Start of Month) × 100. If you had 200 customers at the start of the month and lost 10, your churn rate is 5%. Even small reductions in churn have an outsized effect on LTV and ARR.