Are You Actually Making Money From Each Customer?

Most SaaS founders obsess over growth: signups, MRR, activation rates.

But growth alone doesn't mean your business is healthy.

In fact, plenty of SaaS startups scale before they understand whether they're making money per customer and they burn through runway chasing growth that isn't sustainable.

That's where unit economics comes in.

It answers the one question every founder needs to ask (but many avoid):

For every new customer, do you earn more than they cost you?

If you don't know the answer, your business might be quietly bleeding cash and you won't know until it's too late.

What Are Unit Economics?

At its core:

Unit economics = how much profit (or loss) you make per customer.

It's not about top-line revenue or active users. It's about whether each customer moves your business forward or pulls it under.

If your cost to acquire and serve a customer is greater than what you earn from them, you're scaling a money-losing machine.

If it's less, you've got leverage you can reinvest, experiment, and grow with confidence.

Either way, you should know. That's why we built our Unit Economics Calculator.

Why Most Founders Ignore This (And Why It's a Mistake)

It's easy to put this off when you're just starting out. The excuses are familiar:

• "We're still pre-revenue."
• "We'll optimize later right now we need growth."
• "Our CAC doesn't matter yet. We're experimenting."

But here's the thing: bad unit economics don't get better at scale. They get worse.

More users means more burn.
More burn means shorter runway.
And if you don't catch it early, you'll be forced to scramble later often when it's already too late to course-correct.

On the flip side?
Good unit economics can unlock growth you didn't realize was possible.

If your LTV is strong and your CAC is low, you might be playing it too safe. You could be investing more in paid acquisition, content, outbound and growing much faster.

Either way, knowing your unit economics gives you permission to move confidently, whether that means fixing the leaks or stepping on the gas.

The 6 Core Metrics That Define Your Unit Economics

You don't need a CFO to figure this out. Just six numbers most of which you already have.

Here's what matters:

1. ARPA (Average Revenue Per Account)

The average amount of revenue you earn from each customer per month.
If a customer is on your $40/month plan, that's your ARPA.

If you've got multiple tiers, ARPA gives you a blended average across them.

2. Gross Margin (%)

This is how much of that revenue you keep after serving the customer.

If you earn $100/month and it costs you $30 to host, support, and deliver, your gross margin is 70%.

In SaaS, you want 70-90%+. Lower than that? You may have infrastructure or support costs that don't scale well.

3. Monthly Churn Rate

The percentage of customers who cancel each month.

Churn affects how long a customer sticks around and the longer they stay, the more profitable they become.

Example:

• 10% churn = 10-month average customer lifetime
• 5% churn = 20-month lifetime
• 2% churn = 50 months (!)

This is why churn is deadly. Even small differences can have massive effects on LTV.

4. CAC (Customer Acquisition Cost)

How much it costs to get one new customer.

Formula:

CAC = Total Sales & Marketing Spend ÷ New Customers

If you're spending $5,000/month and getting 100 new users, your CAC is $50.

This number often surprises early founders especially when you factor in salaries, ad spend, tools, and time.

5. Contribution Margin

This is your real monthly profit per customer.

Contribution Margin = ARPA x Gross Margin

If your ARPA is $50 and your gross margin is 80%, your contribution margin is $40/month.

This is the number that actually pays back your CAC.

6. LTV (Customer Lifetime Value)

How much total profit you earn from a customer before they churn.

LTV = Contribution Margin x Customer Lifetime
(Customer Lifetime = 1 / Monthly Churn)

So with a $40/month contribution margin and a 5% churn rate (20-month lifetime), your LTV is $800.

Now Here's Where It Gets Interesting: LTV:CAC Ratio

This ratio tells you whether you're in a healthy place.

• < 1 → You're losing money per customer
• 2:1 → You're okay, but tight
• 3:1 → Healthy SaaS baseline
• 5:1 or more → Could be great, but also a signal you're underinvesting

Wait, Isn't 5:1 a Good Thing?

Yes but it could also mean this:

You've built a money-making machine but you're not feeding it.

Founders often think high LTV:CAC means they're crushing it.
But if you can spend $100 to make $500 why stop at $100?

A ratio that's too high often signals missed opportunity.
If your funnel is working and your margins are strong, it might be time to spend more, not less.

Unit economics doesn't just tell you if something's broken it tells you when you can push harder.

Bonus: Payback Period

This metric tells you how fast you earn back your CAC.

Payback = CAC ÷ Contribution Margin

If your CAC is $160 and you make $40/month per customer in profit, your payback period is 4 months.

Most SaaS companies aim for under 12 months.
Shorter = better cash flow = more flexibility.

You Can Calculate All This in 30 Seconds

Our Unit Economics Calculator asks for 5 simple inputs:

• Your ARPA
• Your gross margin
• Your monthly churn rate
• Your total sales & marketing spend
• Your new customers per month

It instantly gives you:

• CAC
• Contribution Margin
• LTV
• LTV:CAC Ratio
• Payback Period

All calculated and clearly explained.

Final Thoughts: Know Where You Stand

You don't need a fancy finance model. You don't need a decade of experience.
But you do need to know if your product actually makes money per customer.

That's the power of unit economics:

• If the numbers are bad → you know what to fix
• If they're good → you know how much harder you can push

Either way, you're no longer guessing.

So before you scale your ad budget, double your team, or raise another round ask yourself:

Are we actually making money from each user or just spending to grow?

👉 Try our Unit Economics Calculator and get your numbers in minutes.