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How PriceWise calculates your SaaS metrics

Last updated: May 2026

LTV (Customer Lifetime Value)

We use the standard SaaS LTV formula, which incorporates gross margin to produce gross profit lifetime value — not revenue lifetime value. This is the correct formulation for unit economics assessment.

LTV = ( ARPU × Gross Margin % ) ÷ Monthly Churn Rate
// ARPU = average monthly revenue per active customer
// Gross Margin = (Revenue - COGS) / Revenue

When gross margin is not provided, we default to 75% — the industry median for SaaS products with moderate infrastructure costs, per OpenView Partners 2024 benchmarks. The calculator always applies the gross margin term; LTV without gross margin is not a meaningful unit economics metric.

CAC (Customer Acquisition Cost)

CAC = Total Sales & Marketing Spend ÷ New Customers Acquired
// over the same time period

Total S&M spend in our calculator includes advertising, sales and marketing salaries, agencies, and tools. When only ad spend is provided without salaries, our CAC is an under-count — the calculator notes this in the results. For accurate blended CAC, include all S&M costs.

LTV:CAC Ratio

Ratio = LTV ÷ CAC

Health signal thresholds: Excellent ≥ 5:1, Healthy 3:1–4.9:1, Needs work 2:1–2.9:1, At risk < 2:1. These thresholds are based on OpenView Partners SaaS Benchmarks 2024, ProfitWell unit economics research, and First Page Sage SaaS CAC benchmarks.

Payback Period

Payback = CAC ÷ ( ARPU × Gross Margin )
// result in months

This is the number of months required to recover the customer acquisition cost from gross profit generated by that customer. Target: under 12 months for SMB, under 18 months for mid-market, under 24 months for enterprise.

MRR and ARR

MRR = Price × Customer Count // for per-seat and flat-rate
MRR = Price Per Unit × Avg Units × Customers // for usage-based
ARR = MRR × 12

12-month MRR projection uses compound growth: MRR × (1 + growth rate - churn rate)^12. This assumes constant growth and churn rates, which is an approximation. Real SaaS businesses experience variable rates — treat the projection as a planning scenario, not a forecast.

Data sources

Disclaimer: All calculations are estimates for informational purposes only. They are not financial advice or a guarantee of any business outcome. Actual results depend on your specific product, market, competition, and execution. Always supplement these estimates with primary research — customer interviews, willingness-to-pay surveys, and analysis of your own historical data.