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As more and more SaaS startups come into contact, it is found that the status of doing SaaS is divided into two categories: one is to treat SaaS as a business; the other is to use SaaS to start a business. The two were originally different stages of one thing, but somehow they became two things. All kinds of masters online and offline are making suggestions for SaaS entrepreneurship; but how to make SaaS business, insightful help is rare.
There was a time when it was popular to see whether a SaaS company was good or not, and it all took LTV/CAC as an example. If it Fax List means that the company is in a healthy state, otherwise it is not very good. Explain, the so-called LTV Lifetime Value, namely customer life cycle value; CAC=Customer Acquisiton Cost, namely customer acquisition cost. Until recently, someone asked me: "Our company's LTV/CAC is greater than 10, but the company doesn't look very healthy, and it is difficult to support it". I can only answer: in 5 or 10 years you can count, it's too early to determine LTV. In fact, the LTV/CAC matter has no measure for the current domestic SaaS. In fact, what domestic SaaS companies need to calculate is not LTV/CAC, but the profit and loss of SaaS business.
That is, let's not talk about the profitability level first, let's first calculate how long it will take to recover the cost of acquiring customers? For example, if the calculation result is 5 years, it means that if the customer renews the contract at that time, the profit will only start from the 6th year. If the customer breaks the contract during this period, the business will directly lose money. You might say that this calculation is so simplistic that it makes all stories impossible to tell. But the algorithm is really straightforward and straight to the point of business.