What's a healthy LTV:CAC?
The classic SaaS benchmark is 3× or higher — meaning a customer is worth at least 3× what it costs to acquire them. Below 1× means you're losing money on every acquisition. Above 5× and you might be under-investing in growth.
This formula assumes steady-state churn. If your cohort retention is improving over time (most SaaS), this number is conservative. For more accurate LTV, use cohort-based LTV which atSpark calculates by default.
What about payback period?
Payback is how long it takes for a single customer's contribution margin to recover the CAC. Best-in-class SaaS targets under 12 months. Over 24 months and you're capital-intensive — fine if you have the runway and the retention.
Why this is the most predictive number
If you only got to track one SaaS metric, it would be cohort retention — and LTV is essentially cohort retention multiplied by economics. A business with great LTV is a business with patient capital and a happy install base.