BUSINESSGuides for startups & scale-ups
Funnel metrics: CAC, payback and conversion per stage.
The short answer
The key funnel metrics are the conversion rate of each stage (e.g. visit → lead → call → customer), the cost per new customer (CAC) and the time it takes a customer to earn back that cost through their margin (CAC payback). Together they show where prospects drop off and how much growth you can afford.
By Manfred “Luigi” Lugmayr – 30+ years in marketing, seven years as CMO at burgerme. · Updated: October 27, 2026
The formulas
| Metric | Formula |
|---|---|
| Conversion rate (stage) | number in next stage ÷ number in current stage |
| CAC | marketing and sales cost ÷ number of new customers (same period) |
| CAC payback (months) | CAC ÷ (monthly revenue per customer × gross margin) |
| LTV | monthly revenue × gross margin × average customer lifetime in months |
| LTV:CAC | LTV ÷ CAC |
Worked example
Assumptions: $10,000 cost per month, 4,000 visits, 3% become leads (120), 25% of those calls (30), 20% of those customers (6). Customers pay $500 a month at 80% margin.
- CAC = $10,000 ÷ 6 ≈ $1,667
- Payback = $1,667 ÷ ($500 × 0.8) ≈ 4.2 months
- With a 24-month lifetime: LTV = 500 × 0.8 × 24 = $9,600 → LTV:CAC ≈ 5.8
All values are illustrative assumptions. A commonly cited SaaS rule of thumb is an LTV:CAC of at least 3:1.
Where to start
Always improve the weakest stage first. Doubling a mid-funnel stage from 10% to 20% has the same effect as twice the traffic – but usually costs less.
Common mistakes
- Calculating CAC from ad spend only and forgetting people costs
- Mixing periods (this month's cost, customers from leads three months ago)
- Averages across all channels instead of CAC per channel
- No consistent definition of lead and call