Unit Economics Calculator

Understanding Unit Economics

Unit economics measure the profitability of a single customer relationship. Three metrics drive everything: Customer Acquisition Cost (CAC), Lifetime Value (LTV), and the LTV:CAC ratio. If you can't make money on individual customers, you can't scale profitably—no matter how fast you grow.

LTV:CAC Ratio Benchmarks

Your LTV:CAC ratio tells investors whether your business model works at scale. Here's what investors expect:

How to Calculate CAC Payback Period

CAC payback tells you how long it takes to recover the cost of acquiring a customer. It's calculated by dividing your CAC by your monthly gross profit per customer (ARPC × Gross Margin). A payback of 12 months means you break even on acquisition costs by month 12—any revenue after that is profit.

Why Payback Matters

• Under 12 months: Excellent. You recover acquisition costs quickly and build cash quickly.
• 12-18 months: Acceptable for Seed, tight for Series A. You need strong retention to survive.
• Over 18 months: Red flag. You're burning cash for too long before customers become profitable.

Net Revenue Retention and LTV

Net Revenue Retention (NRR) is the revenue from existing customers, including churn, expansion, and upsells. An NRR of 110% means you're generating 110% of the prior period's revenue from the same cohort—you're growing even without adding new customers. High NRR (120%+) dramatically increases LTV and signals a sticky product.

Common Unit Economics Mistakes

Forgetting to Account for Churn

Many founders calculate LTV as ARPC / Churn without accounting for gross margin. Your LTV should be (ARPC × Gross Margin) / Monthly Churn. Not including gross margin overstates LTV and masks operational inefficiency.

Using Blended CAC Instead of Channel-Specific CAC

A blended CAC can hide that one acquisition channel is wildly unprofitable. Calculate CAC by channel (organic, paid search, partnerships, etc.) and focus spend on the most profitable channels.

Ignoring Expansion Revenue

If your NRR is above 100%, existing customers are generating revenue growth beyond initial acquisition. This expansion revenue is "free" growth—it dramatically improves LTV and should be highlighted to investors.