- In the example, £3m of sales and marketing wins 60 customers at £25k ARR each: a CAC of £50k per customer and a CAC ratio of £2.00 per £1 of new ARR.
- With an 80% gross margin, each customer takes 30 months to pay back their acquisition cost.
- With 12% of customers lost a year, lifetime value is about £167k: an LTV:CAC of 3.3x.
- The median B2B SaaS company spent $2.00 of sales and marketing for each $1 of new-customer ARR in 2024 (Benchmarkit).
Customer acquisition cost (CAC) tells a SaaS business what it costs to win revenue, and CAC payback tells it how long that revenue takes to earn the cost back. Together with lifetime value (LTV), they show whether growth creates value or burns cash. This post works through one illustrative example.
The example: a B2B SaaS company spends £3m a year on sales and marketing and wins 60 new customers, each paying £25k a year. Its gross margin is 80%, and it loses 12% of its customers a year.
CAC and the CAC ratio
CAC per customer = sales and marketing spend ÷ new customers = £3m ÷ 60 = £50k.
CAC ratio = sales and marketing spend ÷ new customer ARR = £3m ÷ £1.5m = £2.00 for every £1 of new ARR. That matches the median in Benchmarkit's 2025 report on 2024 data, which defines it the same way.
CAC payback
CAC payback is how many months of gross profit from a customer it takes to cover the cost of winning them: CAC ÷ (monthly revenue per customer × gross margin) = £50k ÷ (£2,083 × 80%) = 30 months. Using gross profit rather than revenue matters, because the cost of serving the customer has to be paid first.
A lower CAC ratio pays back faster. At an 80% gross margin, each £1 of CAC ratio is 15 months:
Lifetime value and LTV:CAC
LTV estimates the gross profit a customer brings in over their life: annual revenue × gross margin ÷ annual churn = £25k × 80% ÷ 12% ≈ £167k. That gives an LTV:CAC of 3.3x. A common target is 3x or more. LTV is sensitive to the churn assumption, and it ignores upgrades and the time value of money, so treat it as a rough guide and use payback alongside it.
What good looks like
- CAC ratio: the 2024 median was $2.00 per $1 of new-customer ARR (Benchmarkit), and it has been rising.
- CAC payback: shorter is better; under 12 months is strong, and Benchmarkit reports the median has lengthened by 12.5% since 2022.
- LTV:CAC: 3x or more.
Make these charts with your own numbers
Track your own CAC ratio and payback by quarter in the line chart or the bar chart, and download them for your board pack.
Sources and method
The company is illustrative. Benchmarks are quoted from Benchmarkit's 2025 SaaS performance metrics (2024 data). LTV here is annual revenue × gross margin ÷ annual customer churn, with no expansion or discounting. Not investment advice.