Healthy unit economics: LTV:CAC ≥ 3:1. CAC payback period under 12 months for SaaS.
CAC = (Marketing + Sales costs) ÷ New customers acquired.
LTV = Average revenue per customer × gross margin × average customer lifespan.
Reach for this calculator when you need to present a business metric to stakeholders. Accurate, consistently-defined figures command more credibility than estimates, particularly in financial discussions.
The most consequential business calculation error is excluding indirect costs from the calculation. Labour, overhead, and opportunity cost are frequently omitted when evaluating profitability, producing overstated margin figures.
A product manager calculates gross margin for a new product line: manufacturing cost £8.50, proposed retail price £24.99. The calculator returns a 66% gross margin — above the company's 60% threshold, confirming the pricing is viable before taking it to the finance team.
3:1 is the benchmark. Above 5:1 is excellent. Below 1:1 means you lose money on every customer.
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