SaaS Unit Economics per Customer

Unit economics are the revenue and costs associated with one customer. Here, customer payments become revenue; after service costs, what’s left is gross profit, which can repay customer acquisition cost, or CAC. We’ll use that monthly profit to understand customer lifetime value and CAC payback.

Each customer brings in £100 of revenue per month. An 80% gross margin leaves £80 after £20 in service costs, so £80 is gross profit per customer-month. Acquisition cost isn’t deducted here; this is the contribution available before that cost.

Customer acquisition cost, or CAC, is the spending needed to win one new customer. Here, that’s £600 once, not each month.

Churn is the share of remaining customers who leave each month. At two percent, expected paid duration is fifty months.

Divide £80 in gross profit per paid month by 2% monthly churn, and estimated gross-profit lifetime value is £4,000 per customer. That’s about 6.7 times the £600 acquisition cost, but it’s a benchmark based on constant churn and margin, not guaranteed cash or profit.

Let's think this through. If gross margin falls but revenue, acquisition cost, and churn stay fixed, what happens to estimated LTV? A: It falls because monthly gross profit falls. B: It stays fixed because churn is unchanged. C: It rises because acquisition cost is unchanged. Choose an answer, or just think it through. I'll explain in a moment.

The answer is A: It falls because monthly gross profit falls. LTV uses gross profit per paid month, not revenue alone. Lower margin leaves less gross profit each month; unchanged churn means the expected number of paid months stays the same.

At eighty pounds of gross profit each month, six hundred pounds of acquisition cost takes seven and a half months to match. The chart shows cumulative gross profit reaching six hundred pounds at that point, assuming payments continue uninterrupted. This simple payback benchmark ignores churn; it isn't a guaranteed recovery date.

CAC is the upfront burden, payback measures recovery speed, and LTV estimates lifetime gross profit. Here, four thousand pounds versus six hundred pounds looks promising under these assumptions, but churn, payment timing, and other costs can change actual profitability.

Margin determines contribution per paid month; churn determines expected duration. Compare their resulting LTV with CAC, while treating payback and forecast-based LTV as benchmarks, not guaranteed cash or profit. Here, £80 monthly gross profit yields £4,000 LTV; £600 CAC means 7.5-month simple payback.