Net Revenue Retention: CAC, LTV, and Churn Explained

Most SaaS founders get their SaaS metrics wrong. Paul Orlando says if you have one number for CAC and one for LTV, you haven't started measuring net revenue retention properly.

Learn how to calculate customer acquisition cost by channel, model LTV as a river, track net revenue retention by cohort, and why negative SaaS churn is the gold standard.

Paul is a USC professor and author of Growth Units. His breakdown of SaaS metrics including net revenue retention, customer acquisition cost, and churn models helps founders measure what matters.

🔑 Key Lessons

• 📉 Break SaaS metrics down by acquisition channel: A blended customer acquisition cost hides which channels scale for net revenue retention.
• 💰 Model LTV as a river, not a single SaaS metric: Map monthly cash flows with retention rates to reveal actual payback periods.
• 🔄 Track cohort-based net revenue retention: Comparing monthly cohorts shows whether product changes actually reduce SaaS churn.
• 🚀 Target negative net revenue retention as the ultimate goal: When remaining customers expand faster than churned ones leave, you achieve negative churn.
• 🧠 The CAC-to-LTV ratio is a starting point for SaaS metrics: Bootstrapped founders may need 1:5 while growth companies accept 1:1.

Chapters

• Introduction
• How Growth Units came about
• Overview: CAC, LTV, and net revenue retention
• What is customer acquisition cost
• Breaking CAC down by channel
• Growing versus scaling
• Fixed vs. variable CAC
• How much should CAC be
• What is LTV as a SaaS metric
• LTV as a river
• Cohort analysis for net revenue retention
• CAC-to-LTV ratio benchmarks
• Three SaaS churn models
• Negative net revenue retention explained
• Lightning round

Resources

• Full show notes: https://saasclub.io/313
• Join 5,000+ SaaS founders: https://saasclub.io/email