CAC and payback
Customer acquisition cost divides sales and marketing cost by acquired customers. Payback estimates how long gross profit takes to recover that cost. Both calculations depend on what spending and which customers are included.
CLV and churn
Customer lifetime value often uses average revenue, gross margin and churn. Monthly churn should be paired with monthly revenue; annual churn should be paired with annual revenue. Mixing periods creates misleading output.
Contribution margin
Contribution margin subtracts variable costs from revenue. It helps estimate how much each sale contributes to fixed costs and profit, but it is not the same as net profit.
Common mistakes
- Using revenue instead of gross profit in payback calculations.
- Counting all marketing spend but only some acquired customers.
- Mixing monthly and annual churn rates.
- Ignoring refunds, discounts, support and payment-processing cost.
SaaS metric examples
Monthly recurring revenue is active recurring subscription revenue in a month. If 120 customers pay 40 per month, MRR is 4,800. If 8 customers cancel, logo churn is 8 / 120 = 6.7% for the period. Revenue churn can differ when cancelled customers are on smaller or larger plans.
CAC and LTV require careful definitions. If sales and marketing spend is 30,000 and it produces 150 new customers, CAC is 200. If average revenue per account is 50 per month, gross margin is 80% and monthly churn is 4%, a simplified LTV estimate is 50 x 0.80 / 0.04 = 1,000. That formula is sensitive to churn measurement quality.
Useful calculators
- Customer Acquisition Cost Calculator
- Customer Lifetime Value Calculator
- Churn Rate Calculator
- Contribution Margin Calculator
- SaaS and Marketing Formulas
FAQ
Should CLV use revenue or gross profit?
For business-quality decisions, gross profit is usually more useful because it reflects the cost to serve customers.
Why is churn period important?
A monthly churn rate and an annual churn rate are not interchangeable.
Can CAC be compared across companies?
Only carefully. Sales cycle, channel mix, customer size and cost allocation can differ substantially.
Last reviewed: 2026-05-16.