Cash is a king
Unit economics for government contracts
Standard SaaS LTV/CAC formulas ignore long government sales cycles, implementation delays, and renewal costs. In B2G, acquisition can take 6–18 months, revenue often starts late, and renewals require selling again. Verter Studio models unit economics with these realities built in — so ratios reflect actual business performance, not flattering assumptions.
2 min read
LTV/CAC in B2G Context
When a founder tells me their LTV to CAC ratio is five to one, my first question is always "how did you calculate that?" Because the standard formulas that work for consumer SaaS break down completely when applied to B2G and enterprise sales. The numbers might look great, but they're often measuring the wrong things.
The textbook calculation is straightforward: lifetime value equals monthly revenue times average customer lifetime, customer acquisition cost equals marketing spend divided by new customers acquired. Simple division gives you the ratio. The problem is that this formula assumes your sales cycle is short enough to ignore and your costs are mostly marketing. Neither assumption holds in B2G.
Government sales cycles run six to eighteen months. That's six to eighteen months of sales team salaries, travel, demos, proposals, and compliance work before you close a single deal. None of that shows up in "marketing spend," but all of it is cost of acquisition. When you include the true sales cycle cost, your CAC doubles or triples overnight.
On the LTV side, the numbers look artificially good because government contracts tend to be long. A thirty-six month contract creates impressive lifetime value. But what's often missing is the implementation cost — typically three to six months of work before the customer starts generating revenue. And government renewals aren't automatic; they go through procurement again, which means another sales cycle, another set of costs.
I've seen founders realize their "5x LTV/CAC" was actually closer to 2x when they accounted for the full picture. That's not a disaster — 2x is still a viable business — but it changes how you think about growth investment and profitability timelines. The Verter Studio framework calculates unit economics with these B2G adjustments built in, so you see reality instead of a flattering simplification.
→ Include full sales cycle cost (6-18 months) in CAC
→ Add implementation period before revenue recognition
→ Account for renewal sales cost in LTV calculations
→ Factor in government-specific compliance costs
View more articles
Learn actionable strategies, proven workflows, and tips from experts to help your product thrive.
