adamriofc Unit Economics
Evaluates whether each customer (or each unit sold) is profitable after acquisition and delivery costs.
Core Metrics
- LTV = ARPPU (average revenue per customer per period) × Retention Horizon (1 ÷ monthly churn rate).
- CAC = Total acquisition cost (ads, sales, onboarding discounts) ÷ number of new customers.
- Contribution margin per unit = Price − variable cost (see break-even-analysis).
- LTV : CAC — an industry heuristic, not a hard rule: ≥ 3 is considered healthy; < 1 = loss per customer.
Rules
- CAC payback period: how many months of the customer's monthly cash inflow it takes to recover CAC — target < 12 months for bootstrapped businesses.
- Separate organic vs paid acquisition: only paid costs enter acquisition CAC; organic is tracked separately.
- Monthly churn is computed from cohorts, not a total average.
Scope & Safety
- Use for: evaluating ad channels, pricing & discount decisions, product prioritization.
- Do not use for: external financial reporting — these are management metrics, not PSAK.
- LTV:CAC ≥ 3 is an industry heuristic; validate with your own channel's actual data.
- LTV projections are sensitive to churn assumptions — test scenarios at ±2 churn points.
Worked Example
Input (local SaaS): ARPPU 150,000/month, churn 5%/month, CAC 800,000, contribution margin 80% of revenue. Output: horizon = 1 ÷ 0.05 = 20 months; LTV = 150,000 × 20 = 3,000,000; LTV:CAC = 3,000,000 ÷ 800,000 = 3.75 (healthy, above the heuristic of 3); payback = 800,000 ÷ (150,000 × 0.8) = 6.7 months.