How to Build Your Unit Economics
Before Your Series A

Series A investors don’t just want to see growth — they want to see that the growth is worth paying for. CAC, LTV, payback period, gross margin: these numbers tell the story of whether your business model actually works at scale. Here’s how to calculate them honestly and what the benchmarks actually look like.

Why Unit Economics Matter More Than Revenue at Series A

Revenue growth tells investors the market exists and you can sell. Unit economics tell them whether the business scales profitably — whether each additional customer makes the business better or just bigger. A company growing 15% month-over-month with a 3x LTV:CAC ratio is a better Series A investment than one growing 20% with a 0.8x ratio. The second company is buying growth at a loss.

The Series A bar has moved significantly since 2021. In the current environment, investors want to see a credible path to profitability — not just a large market and fast growth. Unit economics are the evidence for that path. If you can’t explain your unit economics clearly and defend the assumptions, the raise will be harder regardless of your growth rate.

CAC — What Actually Goes In

Customer Acquisition Cost is the total cost of acquiring a new customer. The number most founders report is too low because it omits costs that feel like overhead rather than acquisition costs.

What goes in: all sales and marketing salaries (including founder time, if the founder is doing sales — use a market rate for the hours spent), all paid marketing spend, tools and software used for sales and marketing, events, content production costs, and any agency or contractor spend on demand generation. Divide the total by the number of new customers acquired in the same period.

Common CAC mistakes: excluding founder sales time (the most common), using a quarterly average that includes a big marketing investment but attributes the customers that came from a prior quarter’s spend, and confusing blended CAC (across all channels) with channel-specific CAC. Investors will ask for both — know the difference.

LTV — The Version Investors Trust

Lifetime Value is how much revenue (or gross profit) a customer generates over their entire relationship with you. The version founders prefer: high assumed lifetime (often 5–7 years) times high ARPU. The version investors trust: based on actual observed retention data, not assumed.

The formula investors use: LTV = ARPU × Gross Margin % ÷ Monthly Churn Rate. If your ARPU is $500/month, gross margin is 70%, and monthly churn is 2%, your LTV is $500 × 0.7 ÷ 0.02 = $17,500. This formula assumes steady-state churn, which is a simplification — but it’s the one investors apply, so know your number.

LTV based on less than 12 months of cohort data is speculative. Be transparent about this — “we’re extrapolating from 8 months of data with X% retention at that mark” is more trustworthy than a 5-year LTV projection from a company that’s 18 months old. Investors know the difference and respect the honesty.

LTV:CAC Ratio and Payback Period Benchmarks

LTV:CAC ratio: the ratio of customer lifetime value to the cost of acquiring them. The general benchmark for a healthy B2B SaaS business: 3x or above. Below 1x means you’re losing money on every customer. Between 1x and 3x means the business is marginally viable but not attractive to investors. Above 5x can suggest underinvestment in growth — you could be acquiring more customers profitably.

CAC payback period: how many months of gross profit from a customer does it take to recover the CAC? Formula: CAC ÷ (ARPU × Gross Margin %). Under 12 months is healthy for B2B SaaS. 12–18 months is acceptable. Over 24 months is a flag — you’re funding a lot of working capital to grow, which compounds the cash need as you scale.

Gross Margin — the Number Most Founders Miscalculate

Gross margin is revenue minus the direct cost of delivering the product (COGS). For SaaS, COGS typically includes: cloud infrastructure/hosting, third-party API costs, customer support headcount directly tied to product delivery, and any implementation or onboarding costs that are specific to each customer.

What is not COGS: sales and marketing (that’s operating expense), product development (also opex), and G&A. The most common mistake: founders include none of their infrastructure costs in COGS, producing artificially high gross margins. Series A investors — and their due diligence — will normalise this. Better to present the accurate number and explain it than to have it revised down during diligence.

Benchmarks: pure SaaS should be 70–85% gross margin. If you’re below 60%, investors will want to understand why and see a path to improvement. If you’re below 40%, the business model needs more work before a Series A conversation is productive.

The Burn Multiple — What Series A Investors Care About Most

Burn multiple = net burn ÷ net new ARR. It measures how much cash you’re spending to generate each dollar of new revenue. A burn multiple of 1x means you’re spending $1 of cash to generate $1 of new ARR. Below 1x is exceptional. Above 2x is a concern. Above 3x is a serious problem at Series A.

Burn multiple has become the dominant efficiency metric for Series A investors because it combines growth and burn into a single number that reveals whether the growth is being bought or earned. A company at 10% monthly growth with a 0.5x burn multiple is a much better investment than one at 15% growth with a 4x burn multiple.

Calculate yours: take your net cash burn for the last 6 months, divide by the net new ARR added in the same period. If the number is above 2x, focus on either improving CAC payback or reducing burn before the raise — it will come up. See our financial model playbook to build these into a proper model.

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