A few years ago, B2B SaaS was dominated by a “Growth at All Costs” mindset. Companies poured capital into sales and marketing, hiring aggressively and spending heavily to drive top-line growth. When interest rates rose and investors tightened their wallets, the focus shifted overnight from growth to efficiency.

Many companies responded with blanket cost-cutting—often without a real strategy for improving efficiency. Now, as the market has stabilized, we need to strike a balance: how much should we invest in growth, and at what cost?

To answer that, revenue leaders often rely on CAC Payback and/or CAC Ratio to measure how efficiently we’re acquiring revenue. These metrics essentially measure the same thing, just expressed in months vs dollars, respectively. But both of these metrics have their limitations.

A newer, more comprehensive metric—GTM Efficiency Ratio, introduced by David Spitz of BenchSights—offers a fuller picture of whether a company’s GTM strategy is actually driving sustainable growth.

Which one is the better predictor of long-term success? Let’s break it down.

What Do These Metrics Measure?

CAC Payback: Measuring the Breakeven Point

Formula:

Or, more commonly:

CAC Payback tells us how many months it takes to recover our sales and marketing investment from each dollar of revenue, or, more commonly, each dollar of gross margin we earn via new customers. It’s one of the most commonly used metrics by SaaS companies and investors alike.

But there are a few key limitations:

• It focuses on breakeven, not profitability.
• It assumes consistent monthly revenue and gross margin, which may not reflect real fluctuations.
• It’s often misunderstood—just because we recoup costs quickly doesn’t mean our GTM engine is healthy.
• It ignores all revenue and costs after the sale. Whether customers are churning quickly, or renewing and expanding year after year, CAC Payback doesn’t reflect this and Gross Margin may not factor the cost to renew or expand the customer.

Ultimately, we can have a CAC Payback of 12 months and pat ourselves on the back, but if that customer churns, we’re not making any money. We could have a longer CAC Payback period and be still more profitable if we retain and expand that customer profitably.

Blended CAC Ratio: Another flavor of CAC Payback

Formula:

The Blended CAC Ratio is very similar to CAC Payback but it measures the cost to generate $1 of revenue via new business and expansion. This is often broken down into each category, making New Business CAC Ratio very similar to CAC Payback, save Gross Margin, which could easily be factored in.

But it has some critical blind spots as well:

• It ignores churn. Blended CAC Ratio focuses only on new and expansion revenue, not the revenue lost from existing customers.
• It doesn’t account for cost-to-serve. The actual profitability of acquired customers is normally missing from the equation.
• It lacks full-funnel visibility. Sales and marketing are not the only revenue drivers—customer success plays a role, but CAC Ratio doesn’t factor it in.

GTM Efficiency Ratio: A More Complete Metric

Formula:

Unlike CAC Payback and CAC Ratio, the GTM Efficiency Ratio looks at total net new revenue, including new business, expansion, churn, and downgrades. It can (and should) also include the cost to retain and expand these customers. It answers a bigger question: how efficiently is our entire GTM motion generating real, retained revenue?

Why this matters:

• It includes churn and downgrades. Companies growing fast but losing revenue just as quickly will see their GTM Efficiency Ratio reflect that.
• It aligns spend with total revenue impact. If upsell and retention drive meaningful growth, they are accounted for. If they’re a drag on revenue, this is also accounted for.
• It helps predict scalable growth. Companies with strong CAC Payback and CAC Ratios might appear efficient on paper while quietly burning cash due to churn. GTM Efficiency Ratio exposes these weaknesses.

Which Metric Actually Predicts Growth?

The biggest issue with CAC Payback and CAC Ratio is that they can make a business appear healthy—even when it’s not.

Let’s look at two companies, each starting the year with $100M in ARR:

CAC Payback – Both are 12 months

If we look at CAC Payback, we see both companies recoup their sales and marketing expenses in 12 months, from New Business.

Blended CAC Ratio – Company A is healthier 

If we look at Blended CAC Ratio, we see Company B spends $0.67 to generate $1 of ARR from New Business and Expansion and Company A only has to spend $0.50 to generate that same dollar. This is a pretty big difference.

GTM Efficiency Ratio – Company A is FAR healthier

If we look at GTM Efficiency Ratio, we see Company A has to spend $0.60 to grow overall ARR by $1 whereas Company B has to spend a whopping $2.00! Both companies spent $30M on sales and marketing but Company B only grew ARR by $15M while company A grew it by $50M.

This is a monumental difference in the overall efficiency of the GTM Engine in these two companies!

For investors and revenue leaders trying to understand long-term sustainability, GTM Efficiency Ratio provides a much fuller picture.

How Should We Use These Metrics?

1. Use the GTM Efficiency Ratio as the North Star

The GTM Efficiency Ratio measures the efficiency of our entire GTM so we can use this as our North Star. If we start to spend too much money to acquire, retain, or expand customers without seeing sufficient revenue growth, this ratio will show us.

We can and should use this North Star to measure our overall GTM Efficiency from year to year.

2. Diagnose GTM Issues Internally

For internal decision-making, CAC Payback/CAC Ratio can still be useful—but it should be segmented.

Look at:

• New Business CAC Ratio vs. Expansion CAC Ratio
  
• CAC Payback/Ratio by channel (Inbound, Outbound, Partner, Paid, etc.)
• Comparison to GTM Efficiency Ratio
  

If CAC Payback/Ratio is improving but GTM Efficiency Ratio is not, NRR, churn or cost-to-serve issues may be eroding growth. It’s important we diagnose each GTM motion on it’s own to see what’s driving overall GTM Efficiency.

3. Benchmark

GTM Efficiency Ratio is a newer metric, so industry benchmarks are still developing, but they are out there. We already have a rule of thumb for CAC Payback, but we need to take our entire GTM into account.

External benchmarks can be incredibly valuable, but what’s most important is our own data. Assuming we can fund growth, we should focus most of all on improving year over year. Companies tracking GTM Efficiency Ratio are already gaining a huge advantage in spotting inefficiencies across sales, marketing, and customer success.

4. Speaking with Investors

Different investment firms, and especially different individuals in those firms, have widely varying levels of understanding of these metrics. Most will want to look at specific metrics like CAC Payback.

It’s obviously important to have a firm grip on our numbers. We also need to have a holistic view that goes beyond what investors ask. We need to show how we’re performing along the metrics they measure AND show a broader view of how the business is performing and why it deserves funding and support to continue the GTM Strategy.

Final Takeaway: Stop Looking at CAC Payback/CAC Ratio in Isolation

CAC Payback and/or CAC Ratio has long been the default efficiency metric in SaaS, but it fails to capture the full picture. LTC/CAC is meant to fill that void, but we’ve written about the issues with this metric. 

GTM Efficiency Ratio is a better predictor of scalable, sustainable growth because it accounts for total net new revenue—including churn and expansion revenue and costs.

For revenue leaders trying to optimize GTM spend, GTM Efficiency Ratio should be the primary metric used to measure overall efficiency. CAC Payback/CAC Ratio should only be used alongside it, with proper segmentation to avoid misleading conclusions.

If we’re still relying on CAC Payback and CAC Ratio alone to measure efficiency, it’s time to update our playbook.

One Small Issue: GTM Efficiency Ratio ignores COGS

As much as we love the GTM Efficiency Ratio, we didn’t invent it and it has one flaw. It doesn’t factor the cost to serve customers and the Gross Margin earned after that cost.

There’s an obvious and simple fix for this and we’ll write about it in an upcoming newsletter.