Unit CAC Ratio: Lifetime Value of the Customer / Customer Acquisition Cost for the Customer

This ratio allows the user to understand the total return of each client. Unit CAC Ratio is calculated by dividing LTV by CAC. It calculates how many times a customer returns the sales and marketing dollars you spent on making them a customer in the first place. 

A Unit CAC Ratio of 3x or more is a sign of a strong return in unit terms and the ability to grow profitably. Conversely, a weak Unit CAC Ratio emphasizes a need for volume due to a smaller profit made on each account.   

Aggregate CAC Ratio: ((Most Recent Quarter's Gross Profit - Previous Quarter's Gross Profit) x 4) / (Previous Quarter's Sales & Marketing Expenses)

You can also calculate an Aggregate CAC Ratio (similar to the Unit CAC Ratio) to understand sales efficiency and the ROI for each dollar spent on customer acquisition by using the Company's Income Statement.

Evaluating this metric will allow us to understand the average time in years required to earn back sales and marketing investments. Capital efficient businesses recover in under a year, yielding a ratio greater than 1.

CAC Payback: Customer Acquisition Cost / Average Revenue Per User 

Another crucial unit-level analysis is the CAC Payback ratio. Simply put, this allows an understanding of how many months it will take to recover customer acquisition spend on a customer-by-customer basis.

These metrics are all good tools to understand sales efficiency. While they are all helpful, the metrics might become more or less critical depending on the business stage. As an operator or an investor, you may decide that determining the unit economics and individual customer profitability is the most important for your early-stage venture. Later-stage companies in SaaS tend to focus on the Aggregate CAC Ratio.