The simplified formulas
CAC equals sales and marketing spend divided by newly acquired customers. Estimated customer lifetime equals one divided by monthly logo churn. LTV then multiplies monthly average revenue per account by gross margin and estimated lifetime.
CAC payback divides CAC by monthly gross profit per customer. Use the same acquisition period and attribution policy for spending and customers; otherwise the denominator can make acquisition look artificially efficient.
Where the shortcut breaks
Constant churn assumes every customer has the same cancellation probability every month. Real retention often falls sharply during onboarding and stabilizes later. Expansion, contraction, annual plans, reactivation, and customer-size differences also change actual value. Mature teams should calculate discounted cohort contribution margin rather than relying only on the shortcut.
Use unit economics as a decision system
Compare results by channel, plan, geography, and customer segment. A blended ratio can hide one profitable channel subsidizing another. Track payback alongside cash runway: even attractive lifetime economics can create a financing problem when acquisition spending is paid long before gross profit arrives.