You don't need to read like a CFO. You do need to read five numbers, and most founders read forty by month eighteen and still can't tell whether the business is healthy. The forty-number dashboard is the financial equivalent of news doom-scrolling — busy, ambient, informative-feeling, useless for decisions.
Five SaaS numbers separate a real business from an expensive hobby. Plain definitions, the only formulas worth memorizing, the thresholds that matter, and the one decision each number drives.
The five numbers — at a glance
- LTV — what a customer is worth over their full life, gross-margin-adjusted
- CAC — what it actually cost to acquire that customer, fully loaded
- Churn — what percentage of customers leave per month (or per year, depending on segment)
- Magic number — how efficiently your sales spend produces new revenue
- Gross margin — how much of each euro of revenue you keep after the cost of serving the customer
These five tell you almost everything. Add five more (cash, MRR, ARR growth, NRR, runway) and you have a complete picture. Add thirty more and you have a dashboard nobody reads.
1. LTV — Lifetime Value
Plain definition
The total gross profit you'll make from one customer across their entire time as a customer.
The only formula worth memorizing
LTV = (Average Revenue Per User × Gross Margin %) ÷ Monthly Churn %
Example: €30/month ARPU, 70% gross margin, 3% monthly churn → LTV = (€30 × 0.70) ÷ 0.03 = €700.
The mistake most founders make is using revenue instead of gross profit. €30 revenue is not €30 of LTV; it's €30 minus your hosting, support, and payment processing cost.
Thresholds that matter
- LTV under €100 in B2B SaaS: probably not viable as a paid acquisition business; needs organic distribution
- LTV €500–€2,000: most prosumer / SMB SaaS lives here
- LTV €2,000+: mid-market and above, generally supports paid acquisition
The decision LTV drives
Whether you can afford paid acquisition at all. If LTV is €200, you cannot pay €150 for a customer through ads — the math is too thin to absorb any error.
2. CAC — Customer Acquisition Cost
Plain definition
What it actually cost to acquire one paying customer — including ad spend, sales salary fraction, tools, content production, agency fees, everything. Fully loaded.
The formula
CAC = (All sales & marketing spend in period) ÷ (New paying customers acquired in same period)
Three traps: (1) using only ad spend (ignores time/content cost), (2) counting trial signups instead of paid conversions, (3) double-counting customers who churned within the period.
The LTV/CAC ratio — the actual number that matters
LTV alone is incomplete. CAC alone is incomplete. The ratio tells the story.
- LTV/CAC under 1: you're selling money for money. Each customer costs more than they're worth. Stop acquiring.
- LTV/CAC 1–3: marginal. You're surviving, not winning. Improve LTV (retention, pricing, expansion) or reduce CAC (organic channels, better targeting).
- LTV/CAC above 3: healthy. You can scale.
- LTV/CAC above 5: probably underspending on growth. The ratio is great but the absolute growth might be slow because you're not deploying enough capital.
The decision CAC drives
Whether to scale a channel. A channel below 3x LTV/CAC stays exploratory. Above 3x and the dollars at scale make sense.
3. Churn — the silent business-killer
Plain definition
The percentage of customers who cancel in a period. Two ways to measure it and you need to pick deliberately:
- Customer churn: % of customers who left this month. Use for SMB and prosumer SaaS.
- Net dollar retention (NDR): revenue from a customer cohort one year later, divided by revenue at the start. Use for mid-market and enterprise where expansion offsets churn.
Thresholds that matter
- SMB monthly customer churn above 5%: you have a leaky bucket. Don't scale acquisition until you've fixed retention
- SMB monthly customer churn 3–5%: workable but you need expansion revenue to grow net
- SMB monthly churn 1–2%: healthy
- Mid-market NDR under 100%: customers are shrinking. Survival mode
- NDR 100–110%: workable, growing slowly
- NDR 120%+: best-in-class. Expansion alone grows the business
The decision churn drives
Whether to focus on acquisition or retention this quarter. Churn above threshold means stop trying to grow the top of the funnel. The bucket has a hole.
4. Magic number — sales efficiency
Plain definition
How much new ARR you get per dollar of sales and marketing spend, on a quarterly basis. Tells you whether your acquisition motion is producing real revenue or just expensive activity.
The formula
Magic Number = (4 × (ARR this quarter − ARR last quarter)) ÷ (S&M spend last quarter)
The 4x annualizes the quarterly delta; the lag on S&M spend reflects that this quarter's revenue mostly came from last quarter's spend.
Thresholds
- Magic number under 0.5: motion not working — every euro of S&M produces less than 50 cents of ARR
- 0.5–1.0: marginal, sustainable but slow
- Above 1.0: healthy, scale carefully
- Above 1.5: probably underspending — you could put more fuel on a working motion
The decision magic number drives
Whether to spend more or less on sales and marketing next quarter. It's the single best one-number diagnostic of whether you have a working acquisition motion.
5. Gross margin — the underrated number
Plain definition
The percentage of revenue you keep after the direct cost of serving the customer. Hosting. Support headcount. Payment processing. Third-party APIs you re-sell. Stripe fees.
The formula
Gross Margin % = (Revenue − Cost of Goods Sold) ÷ Revenue × 100
Thresholds
- Pure software SaaS: 75–85% gross margin is the band. Below 70% and something's wrong — usually hidden infrastructure costs or under-priced support
- Services-light SaaS (some onboarding, support): 60–75% is the band
- Services-heavy SaaS or marketplace: 30–50% — different business model, different valuation math
The decision gross margin drives
Whether you have software economics or services economics. Below 50%, you're closer to a consultancy than a SaaS — which is fine, but changes how you think about scale.
How to actually use the five numbers
Read them monthly, on the first of the month
Five numbers, fifteen minutes, on a recurring calendar slot. Not in a forty-line dashboard. Five numbers, written down. Compare to last month and last year.
Each number maps to one decision
LTV → can we afford paid acquisition?
CAC → which channel scales?
Churn → fix the bucket or grow the funnel?
Magic number → spend more or less on growth?
Gross margin → are we software or services?
If none of the five changed enough to alter a decision, the month was business-as-usual. That's information too.
Set absolute thresholds, not just direction
"Churn went up" is anxiety. "Churn went from 3% to 5%" is a decision. "Churn went from 3% to 5% and the threshold for scaling acquisition is 4%" is a plan. Write the thresholds down before the data arrives so you don't talk yourself into ignoring them.
How MoatKit handles SaaS math
The five-number monthly cadence is built into the Operate layer of MoatKit. Each number has a calculator in the Tools surface (LTV/CAC, runway, magic number, gross margin). The monthly review is a recurring task in the Tasks queue. The runway post covers the sixth number — runway itself — in more depth.
The forty-number dashboard isn't your fault — most analytics tools default to it. Resist. Read five every month. Act on the one that changed. Skip the rest until next month. That's the financial discipline that separates a founder who knows their business from one who's just busy inside it.