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Most SaaS teams aren’t short on dashboards. They’re short on numbers they can act on.
Unit economics is simply the money you earn and spend per customer (or per account). Get it right and you can answer the questions that matter: should we hire more sales reps, push spend into paid channels, change pricing, or slow down and fix churn?
In February 2026, investor expectations still lean hard towards efficiency, margin discipline, and clear payback. Growth helps, but it has to be clean growth. This is why Consult EFC (as a Fractional CFO SaaS partner) focuses on four metrics that connect straight to decisions: CAC payback, LTV, gross margin, and burn multiple.
This post lays out the formulas, the inputs we insist on, and how each metric changes what you do next.
Start with clean inputs, or your metrics will lie
The maths is rarely the hard part. The setup is where teams get caught out. If the inputs are messy, your “good” CAC payback can be a mirage, and your LTV can look heroic right before churn hits.
At minimum, you need these inputs, defined the same way every month:
- Sales and marketing spend (fully loaded): salaries, commissions, contractors, agency retainers, tools, paid media, events, and any material leadership time spent directly on acquisition.
- New customers or net new ARR: pick the right denominator for your go-to-market motion and stick to it.
- ARPU or ACV: average revenue per user (monthly) or annual contract value (annual), measured on a recognised revenue basis.
- Churn: logo churn and revenue churn, plus net revenue retention (NRR) if expansion is material.
- COGS: hosting, support, third-party tools, and AI compute where relevant.
- Net burn and net new ARR: for burn multiple, calculated on the same period.
Consistency on time periods matters. If CAC is calculated monthly but new ARR is captured quarterly, your payback can swing for reasons that have nothing to do with performance. Consult EFC typically standardises the pack to monthly tracking, with quarterly views for board and investor discussions.
Common errors we remove early:
- Mixing one-off services with subscription revenue.
- Misclassifying COGS as operating expenses (or the other way round).
- Counting trials as customers.
- Ignoring refunds, credits, and downgrades.
- Using bookings instead of recognised revenue.
- Rolling all channels together, then wondering why results vary.
In practice, we often re-map the chart of accounts so gross margin and CAC are measurable, then build a small metric pack that can be trusted in leadership meetings.
CAC payback, the fastest way to decide if growth spend is working
CAC payback answers a simple question: how many months until you earn back what you spent to win a customer? If you don’t know that, scaling sales and marketing is guesswork.
The core formula we use is:
CAC payback (months) = CAC ÷ (monthly ARPU × gross margin %)
Where:
- CAC is your fully loaded sales and marketing spend divided by the customers acquired (or net new ARR, for enterprise motions).
- Monthly ARPU is what a typical new customer pays per month (recognised revenue).
- Gross margin % adjusts for the real cost to serve, because £1 of revenue is not £1 of payback if serving that customer costs you 35p.
How Consult EFC calculates CAC in a decision-ready way:
- We include salaries, commissions, employer costs, agency fees, tools, and paid spend.
- If leadership time is a real driver of closed deals, we include a fair allocation. Not to punish anyone, but to stop the business believing it has a scalable motion when it’s actually founder-powered.
- We match spend and results over the same “motion”. Often that means using a trailing three-month view so one-off campaigns don’t distort the picture.
What good can look like today: for many B2B SaaS teams, 12 to 18 months is a common target band, with under 12 months more typical as you scale and conversion improves. Product-led growth often shows faster payback on paper, enterprise sales can be slower, but should repay with higher contract values and lower churn.
CAC payback should drive clear decisions: when to scale spend, when to pause a channel, and when pricing or onboarding needs attention.
How Consult EFC pressure-tests CAC, so the payback number is trusted
A single blended CAC payback can hide a lot. We pressure-test it in three ways.
First, we split CAC by channel (paid, outbound, partners, organic). Paid search might repay quickly, while events might never repay, yet the blend looks “fine”.
Second, we split by segment (SMB vs mid-market vs enterprise). A mid-market deal might look expensive to acquire, but pay back faster if churn is lower and expansion is stronger.
Third, we split by cohort (month signed). If payback is getting worse for recent cohorts, the fix is urgent.
We also make sure the denominator matches the motion:
- For high-velocity SMB, new customers can be the right basis.
- For enterprise, the denominator is often net new ARR because customer counts tell you very little.
Lag effects matter. Marketing spend in January can close in March. If you match January spend to January closes, CAC looks awful, then magically improves later. We handle this with a lookback window and, where helpful, a pipeline view (pipeline created vs customers closed).
Finally, we correct for discounting and sales rep ramp time. Heavy first-year discounts can make payback look better or worse than reality, depending on how revenue is recorded. New reps can also make CAC look inflated for a few months, which is normal, as long as ramp assumptions are explicit.
What to do when CAC payback is too slow
Slow payback is not a moral failing. It’s a signal. The fix is usually one of four levers:
- Raise ARPU: tighten packaging, improve value messaging, push annual plans, or remove low-value discounts.
- Lift gross margin: reduce serving costs, tackle cloud waste, contain support load, and price for compute if usage is high.
- Reduce CAC: shift channel mix, narrow your ideal customer profile (ICP), improve conversion at each step, and cut what doesn’t convert.
- Improve retention: early churn kills payback. Fix onboarding, time-to-value, and product gaps that trigger first-90-day exits.
A key warning: don’t scale spend before payback stabilises. When payback drifts out, burn multiple often climbs with it, and you lose room to manoeuvre.
LTV and gross margin, the pair that tells you what each customer is really worth
LTV is meant to answer, “What is a customer worth over time?” The trap is calculating LTV off revenue alone. If your margin is thin, or support costs explode with usage, your LTV is overstated.
For most subscription SaaS, Consult EFC uses a practical formula:
LTV = (ARPU × gross margin %) ÷ churn rate
A few definitions that keep this honest:
- ARPU should reflect the segment you’re analysing, not a blended average.
- Gross margin % is (revenue minus COGS) ÷ revenue.
- Churn rate needs a clear choice: logo churn for customer loss, revenue churn for revenue loss. If you have meaningful expansion, net revenue retention (NRR) often tells the truth better than simple churn.
Benchmarks are not targets, but they are useful guardrails. A healthy LTV:CAC ratio often sits around 3:1 to 5:1. Below that, you’re either overspending to acquire customers, underpricing, or losing customers too fast. Stronger businesses often hold 4:1 and above without relying on accounting tricks.
Gross margin is where many teams get surprised in 2026. Traditional SaaS margins often land in the 70% to 90% range, but AI-heavy products can run lower because compute is real cost, not a rounding error. Many AI-first products can land closer to 50% to 65% until pricing and infrastructure mature. If you don’t track compute and support as COGS, you can’t see the problem early.
Consult EFC draws the COGS line so leaders can act on it, not so finance can win a debate.
A simple way Consult EFC sets your COGS line, so gross margin drives action
Here’s the rule that keeps classification simple: if the cost scales with customers or usage, it belongs in COGS. If it scales with running the company, it’s operating expense.
Common COGS items in SaaS include:
- Cloud hosting and data storage
- AI inference and token costs
- Third-party APIs that are used per request or per customer
- Monitoring and security tools priced by usage
- Customer support costs that rise with tickets and customers
- Customer success tooling if it scales directly with the book of business
- Repeatable onboarding and implementation effort (if you do it for every new account)
This matters because gross margin should shape product and pricing decisions. If an enterprise deal looks large but demands heavy onboarding, bespoke reporting, and weekly support, it can be less profitable than ten smaller customers. The P&L won’t warn you if those costs are buried in operating expenses.
How to use LTV and margin to pick an ICP and pricing you can defend
Blended LTV is often comforting and mostly useless. The point is segmentation.
Consult EFC encourages teams to calculate LTV, margin, and churn by customer type, plan, and acquisition channel. Patterns show up fast:
- A segment with low churn but high support can still be unattractive if margin is squeezed.
- A segment with high churn can look fine on day one, then collapse LTV after three months.
- A channel that brings bargain-hunters can destroy LTV:CAC even if CAC looks low.
The decision outcomes are practical:
- Drop or re-price low-margin segments.
- Stop discounting that breaks LTV:CAC.
- Focus on customers with strong retention, predictable support load, and clear expansion paths.
Annual prepay and usage-based add-ons can help cash and margin, but they need care. If bills spike without warning, churn can rise and LTV falls. Good packaging makes costs feel fair and predictable.
Burn multiple, the scoreboard for growth efficiency and cash discipline
Burn multiple brings the whole company into the picture. CAC payback tests whether acquisition spend works. Burn multiple tests whether total spend matches the growth you are getting.
In plain English: how many pounds do you burn to add one pound of new ARR?
The core formula is:
Burn multiple = net burn ÷ net new ARR (over the same period, often quarterly)
Where:
- Net burn is the net cash outflow over the period (cash out minus cash in), excluding financing events like new investment.
- Net new ARR is the increase in annual recurring revenue over the same period, net of churn and downgrades.
Many investors still use simple rules of thumb: under 2.0 is generally healthy, under 1.5 is strong for scaling teams, and higher numbers need a clear explanation (new market entry, product rebuild, a deliberate step-up in R&D). The key is not the single number, it’s the trend and the story behind it.
Consult EFC uses burn multiple alongside CAC payback to make planning real. If payback is improving but burn multiple is worsening, overhead is likely creeping up. If burn multiple is improving but payback is getting worse, growth may be coming from expansion, price rises, or one-off wins rather than a repeatable acquisition motion.
This feeds straight into operating decisions: hiring pace, runway, and whether to push for growth or push for margin.
Why burn multiple spikes, even when revenue is growing
Burn multiple can jump even with solid top-line growth. The usual causes are straightforward:
- Sales hiring ahead of demand, with reps ramping slower than planned
- Long enterprise cycles that delay ARR while costs land immediately
- High churn wiping out new ARR
- Heavy discounting that reduces net new ARR on paper
- Rising cloud or AI compute costs lowering gross margin
- Bloated overhead that doesn’t move the revenue line
Timing can also distort the picture. Big annual invoices can make cash look healthier in one month, while expenses land evenly each month. That’s why Consult EFC looks at a 3 to 6-month trend, not a single quarter in isolation.
Scaling with a Fractional CFO: When do Unit Economics Matter Most?
SaaS unit economics only matter if they change what you do on Monday. Review these monthly, and keep them tied to real actions:
- CAC payback by channel and segment
- Gross margin with clear COGS rules
- LTV and LTV:CAC by cohort
- Burn multiple versus runway
The goal is better choices on spend, target customers, pricing, and pace. If you want decision-grade metrics, Consult EFC can clean up inputs, build a simple metric pack, and turn the numbers into an operating plan that supports funding, scaling, and exit.
Book a FREE consultation today.
If you are looking for a Business Valuation, visit our services here.
Further Insights for High-Growth SaaS Companies
SaaS Business Valuation in 2026: How SaaS ARR Multiples Really Work
SaaS Forecasting for Founders: From Pipeline to Cash, Hiring, and Runway
