SaaS vs. in-house software ROI & cash runway simulator

Lifetime value (LTV) is the gross profit a single customer account is expected to generate before it churns. This simulator uses the standard recurring-revenue form: LTV = (ARPA x gross margin) / monthly revenue churn rate. If your average account pays $420 a month, your gross margin is 78%, and you lose 3.2% of recurring revenue each month, LTV is (420 x 0.78) / 0.032, or roughly $10,238. The gross-margin term matters: revenue you never keep is not value. Two companies with identical ARPA and churn can have LTVs that differ by 40% purely on cost of revenue.

Customer acquisition cost (CAC) is the fully-loaded spend required to win one new paying account: paid media, sales salaries and commission, marketing headcount, content production, events, and the tooling that supports them, divided by the number of new accounts in the same period. Blended CAC includes organic signups in the denominator; paid CAC counts only accounts attributable to paid channels. The simulator uses blended CAC, because that is what actually consumes cash. Excluding sales payroll from CAC is the single most common way teams flatter their own unit economics.

The conventional benchmark is 3:1. Below 1:1 the business destroys value with every sale. Between 1:1 and 3:1 you are usually paying too much for growth, or losing customers too quickly to earn back the acquisition cost. Above 5:1 is not automatically good news - it often means the company is under-investing in acquisition and leaving reachable market on the table. The ratio should always be read next to CAC payback period, because a 4:1 ratio with a 30-month payback still starves the balance sheet.

CAC payback is the number of months of gross profit required to recover the cost of acquiring a customer: CAC / (ARPA x gross margin). It is the cash-flow view of the same relationship LTV:CAC describes in aggregate. LTV:CAC tells you whether a customer is eventually worth acquiring; payback tells you how long you finance that customer before finding out. Best-in-class B2B SaaS lands under 12 months. Beyond 18 months, growth is effectively debt-funded, and the runway calculation on this page will show it.

Logo churn counts accounts lost. Revenue churn counts dollars lost. They diverge whenever customers are unequal in size - which is always. A company can lose 5% of its logos and only 1% of its revenue if the departures are all small accounts, or lose 2% of logos and 9% of revenue if one enterprise contract leaves. This simulator models revenue churn, because revenue is what pays payroll. Net revenue retention goes one step further by adding expansion revenue back in; above 100% means the existing customer base grows on its own, before any new sales.

Runway is the number of months before the cash balance reaches zero at the current rate of net burn. The naive version divides cash by last month burn. This simulator does something more useful: it projects the full 60-month path, month by month, with revenue growth, churn, salary inflation, cloud costs that scale with revenue, and re-investment all compounding against each other. The runway figure is the last month in which the balance is still positive. Because burn changes as the business grows, that number is frequently very different from cash divided by current burn.

This page reports two different break-evens, and confusing them is expensive. Operating break-even is the first month in which gross profit covers the operating cost base - the month the business stops losing money. Cumulative break-even, or payback, is the later month in which total profit earned since month zero finally offsets everything lost before operating break-even. A company can be profitable every month and still be years away from having repaid its own history.

Buying wins on time-to-value and on cost predictability; building wins on marginal cost at scale and on control. The crossover is driven by three numbers this simulator makes explicit: the per-seat licence cost multiplied by a seat count that grows with headcount, the one-time build cost amortised over the build period, and the permanent maintenance FTE the internal system consumes forever. The mistake is almost never the build estimate - it is forgetting maintenance. A system that took nine months to build and takes 1.2 engineers to run costs roughly $174,000 a year, every year, at a $145,000 loaded salary. Compare that to the licence line before deciding.

Cloud spend has a fixed component that exists at zero customers - control planes, base compute, observability, environments - and a variable component that tracks usage, which in turn tracks revenue. Modelling only the fixed part understates the cost of growth and makes high-growth scenarios look better than they are. The cost-per-$1,000-of-MRR input captures the variable part directly. In practice it falls as a company matures and infrastructure efficiency work compounds, so a flat value is a conservative assumption over a 5-year horizon.

It routes a share of each month operating profit back into paid acquisition rather than to the cash balance. That spend converts to new recurring revenue the following month at your stated CAC and ARPA, which then compounds. Raising it accelerates revenue and delays cash accumulation; lowering it builds cash and slows growth. This is the central trade-off in a capital-efficient software business, and it is why the cash-balance curve and the revenue curve can move in opposite directions at the same time.

Burn multiple is net burn divided by net new ARR - how many dollars the company consumes to add one dollar of annual recurring revenue. Under 1x is exceptional, 1x-1.5x is good, 2x-3x is a signal that growth is being bought rather than earned, and above 3x is usually unsustainable outside a deliberate land-grab. Unlike growth rate, it cannot be improved by spending more, which is what makes it a useful cross-check on every other number on this page.

Directionally useful, precisely wrong. Any model that compounds monthly rates over 60 periods is extremely sensitive to its assumptions: a 1-point change in monthly churn moves year-5 revenue by tens of percent. That sensitivity is the reason this page runs three scenarios side by side rather than presenting one number. Use the spread between conservative and aggressive as the actual output; treat the realistic column as a midpoint, not a forecast. Projections are a tool for understanding which variables matter, not for predicting the future.