Financial Unit Economics
Table of Contents
Purpose
Financial Unit Economics analyzes the profitability of individual units (customers, products, transactions) to determine if a business model is viable and scalable. This skill guides you through calculating key metrics (CAC, LTV, contribution margin), interpreting ratios, conducting cohort analysis, and making data-driven decisions about pricing, marketing spend, and growth strategy.
When to Use
Use this skill when:
- Business model validation: Determine if startup/new product can be profitable at scale
- Pricing decisions: Set prices based on target margins and customer economics
- Marketing spend: Assess ROI of acquisition channels, optimize CAC
- Growth strategy: Decide when to scale (raise funding, increase spend) based on unit economics
- Product roadmap: Prioritize features that improve retention or reduce churn (increase LTV)
- Investor pitch: Demonstrate business model viability with CAC, LTV, payback metrics
- Channel optimization: Compare profitability across customer segments or acquisition channels
- Subscription models: Analyze recurring revenue, churn, cohort retention curves
- Marketplace economics: Model take rate, supply/demand side economics, liquidity
- Financial planning: Forecast cash flow, runway, burn rate based on unit economics
Trigger phrases: "unit economics", "CAC/LTV", "customer acquisition cost", "lifetime value", "contribution margin", "payback period", "customer profitability", "break-even", "cohort analysis", "is this business viable?"
What Is It?
Financial Unit Economics is the practice of measuring profitability at the most granular level (per customer, product, or transaction) to understand if revenue from a single unit exceeds the cost to acquire and serve it.
Core components:
- CAC (Customer Acquisition Cost): Total sales/marketing spend ÷ new customers acquired
- LTV (Lifetime Value): Revenue from customer over their lifetime minus variable costs
- Contribution Margin: (Revenue - Variable Costs) ÷ Revenue (as %)
- LTV/CAC Ratio: Measures return on acquisition investment (target: 3:1 or higher)
- Payback Period: Months to recover CAC from customer revenue
- Cohort Analysis: Track metrics over time for customer groups (by acquisition month/channel)
Quick example:
Scenario: SaaS startup, subscription model ($100/month), analyzing unit economics.
Metrics:
- CAC: $20k marketing spend, 100 new customers → CAC = $200
- Monthly revenue per customer: $100
- Variable costs: $20/customer/month (hosting, support)
- Gross margin: ($100 - $20) / $100 = 80%
- Monthly churn: 5% → Average lifetime = 1 / 0.05 = 20 months
- LTV: $100 revenue × 20 months × 80% margin = $1,600
- LTV/CAC: $1,600 / $200 = 8:1 ✓ (healthy, >3:1)
- Payback period: $200 CAC ÷ ($100 × 80% margin) = 2.5 months ✓ (good, <12 months)
Interpretation: Strong unit economics. Each customer generates 8× their acquisition cost. Can profitably scale marketing spend. Payback in 2.5 months means fast capital recovery.
Core benefits:
- Early warning system: Detect unsustainable business models before scaling losses
- Data-driven growth: Know when unit economics justify increasing spend
- Channel optimization: Identify which acquisition channels are profitable
- Pricing power: Quantify impact of price changes on profitability
- Investor confidence: Demonstrate path to profitability with clear metrics
Workflow
Copy this checklist and track your progress:
Unit Economics Analysis Progress:
- [ ] Step 1: Define the unit
- [ ] Step 2: Calculate CAC
- [ ] Step 3: Calculate LTV
- [ ] Step 4: Assess contribution margin
- [ ] Step 5: Analyze cohorts
- [ ] Step 6: Interpret and recommend
Step 1: Define the unit
What is your unit of analysis? (Customer, product SKU, transaction, subscription). See resources/template.md.
Step 2: Calculate CAC
Total acquisition costs (sales + marketing) ÷ new units acquired. Break down by channel if applicable. See resources/template.md and resources/methodology.md.
Step 3: Calculate LTV
Revenue over unit lifetime minus variable costs. Use cohort data for retention/churn. See resources/template.md and resources/methodology.md.
Step 4: Assess contribution margin
(Revenue - Variable Costs) ÷ Revenue. Identify levers to improve margin. See resources/template.md and resources/methodology.md.
Step 5: Analyze cohorts
Track retention, LTV, payback by customer cohort (acquisition month/channel/segment). See resources/template.md and resources/methodology.md.
Step 6: Interpret and recommend
Assess LTV/CAC ratio, payback period, cash efficiency. Make recommendations (pricing, channels, growth). See resources/template.md and resources/methodology.md.
Validate using resources/evaluators/rubric_financial_unit_economics.json. Minimum standard: Average score ≥ 3.5.
Common Patterns
Pattern 1: SaaS Subscription Model
- Key metrics: MRR, ARR, churn rate, LTV/CAC, payback period, CAC payback
- Calculation: LTV = ARPU × Gross Margin % ÷ Churn Rate
- Benchmarks: LTV/CAC ≥3:1, Payback <12 months, Churn <5% monthly (B2C) or <2% (B2B)
- Levers: Reduce churn (increase LTV), upsell/cross-sell (increase ARPU), optimize channels (reduce CAC)
- When: Subscription business, recurring revenue, retention critical
Pattern 2: E-commerce / Transactional
- Key metrics: AOV (Average Order Value), repeat purchase rate, contribution margin per order, CAC
- Calculation: LTV = AOV × Purchase Frequency × Gross Margin % × Customer Lifetime (years)
- Benchmarks: Contribution margin ≥40%, Repeat purchase rate ≥25%, LTV/CAC ≥2:1
- Levers: Increase AOV (bundling, upsells), drive repeat purchases (loyalty programs), reduce variable costs
- When: Transactional business, e-commerce, retail
Pattern 3: Marketplace / Platform
- Key metrics: Take rate, GMV (Gross Merchandise Value), supply/demand CAC, liquidity
- Calculation: LTV = GMV per user × Take Rate × Gross Margin % ÷ Churn Rate
- Benchmarks: Take rate 10-30%, LTV/CAC ≥3:1 for both sides, network effects kicking in
- Levers: Increase take rate (value-added services), improve matching (increase GMV), balance supply/demand
- When: Two-sided marketplace, platform business
Pattern 4: Freemium / PLG (Product-Led Growth)
- Key metrics: Free-to-paid conversion rate, time to convert, paid user LTV, blended CAC
- Calculation: Blended LTV = (Free users × Conversion % × Paid LTV) - (Free user costs)
- Benchmarks: Conversion ≥2%, Time to convert <90 days, Paid LTV/CAC ≥4:1
- Levers: Increase conversion rate (improve product, optimize paywall), reduce time to value, lower CAC via virality
- When: Product-led growth, freemium model, viral product
Pattern 5: Enterprise / High-Touch Sales
- Key metrics: CAC (including sales team costs), sales cycle length, NRR (Net Revenue Retention), LTV
- Calculation: LTV = ACV (Annual Contract Value) × Gross Margin % × Average Customer Lifetime (years)
- Benchmarks: LTV/CAC ≥3:1, Sales efficiency (ARR added ÷ S&M spend) ≥1.0, NRR ≥110%
- Levers: Shorten sales cycle, increase ACV (upsell, premium tiers), improve retention (NRR)
- When: Enterprise sales, high ACV, long sales cycles
Guardrails
Critical requirements:
Fully-loaded CAC: Include all acquisition costs (sales salaries, marketing spend, tools, overhead allocation). Underestimating CAC makes unit economics look better than reality. Common miss: excluding sales team salaries.
True variable costs: Only include costs that scale with each unit (COGS, hosting per user, transaction fees). Don't include fixed costs (rent, core engineering). LTV calculation requires accurate margin.
Cohort-based LTV: Don't average across all customers. Early cohorts ≠ recent cohorts. Track retention curves by cohort (acquisition month/channel). LTV should be based on observed retention, not assumptions.
Time horizon matters: LTV is a prediction. Use conservative assumptions. For new products, LTV estimates are unreliable (insufficient data). Weight recent cohorts more heavily.
Payback period vs. LTV/CAC: Both matter. High LTV/CAC but long payback (>18 months) strains cash. Fast payback (<6 months) allows rapid reinvestment. Optimize for both.
Channel-level analysis: Blended metrics hide truth. CAC and LTV vary by channel (paid search vs. referral vs. content). Analyze separately to optimize spend.
Retention is king: Small changes in churn have exponential impact on LTV. Improving monthly churn from 5% to 4% increases LTV by 25%. Retention improvements > acquisition improvements.
Gross margin floor: Need ≥60% gross margin for SaaS, ≥40% for e-commerce to be viable. Low margin means high LTV/CAC ratio still yields poor cash flow.
Common pitfalls:
- ❌ Ignoring churn: Assuming customers stay forever. Reality: churn compounds. Use cohort retention curves.
- ❌ Vanity LTV: Using unrealistic retention (e.g., 5 year LTV with 1 month of data). Stick to observed behavior.
- ❌ Blended CAC: Mixing profitable and unprofitable channels. Break down by channel, segment, cohort.
- ❌ Not updating: Unit economics change as product, market, competition evolve. Re-calculate quarterly.
- ❌ Missing costs: Forgetting support costs, payment processing fees, fraud losses, refunds. Track everything.
- ❌ Premature scaling: Growing before unit economics work (LTV/CAC <2:1). "We'll make it up in volume" rarely works.
Quick Reference
Key formulas:
CAC = (Sales + Marketing Costs) ÷ New Customers Acquired
LTV (subscription) = ARPU × Gross Margin % ÷ Monthly Churn Rate
LTV (transactional) = AOV × Purchase Frequency × Gross Margin % × Lifetime (years)
Contribution Margin % = (Revenue - Variable Costs) ÷ Revenue
LTV/CAC Ratio = Lifetime Value ÷ Customer Acquisition Cost
Payback Period (months) = CAC ÷ (Monthly Revenue × Gross Margin %)
CAC Payback (months) = S&M Spend ÷ (New ARR × Gross Margin %)
Gross Margin % = (Revenue - COGS) ÷ Revenue
Customer Lifetime (months) = 1 ÷ Monthly Churn Rate
MRR (Monthly Recurring Revenue) = Sum of all monthly subscriptions
ARR (Annual Recurring Revenue) = MRR × 12
ARPU (Average Revenue Per User) = Total Revenue ÷ Total Users
NRR (Net Revenue Retention) = (Starting ARR + Expansion - Contraction - Churn) ÷ Starting ARR
Benchmarks (varies by stage and industry):
| Metric |
Good |
Acceptable |
Poor |
| LTV/CAC Ratio |
≥5:1 |
3:1 - 5:1 |
<3:1 |
| Payback Period |
<6 months |
6-12 months |
>18 months |
| Gross Margin (SaaS) |
≥80% |
60-80% |
<60% |
| Gross Margin (E-commerce) |
≥50% |
40-50% |
<40% |
| Monthly Churn (B2C SaaS) |
<3% |
3-7% |
>7% |
| Monthly Churn (B2B SaaS) |
<1% |
1-3% |
>3% |
| CAC Payback (SaaS) |
<12 months |
12-18 months |
>18 months |
| NRR (SaaS) |
≥120% |
100-120% |
<100% |
Decision framework:
| LTV/CAC |
Payback |
Recommendation |
| <1:1 |
Any |
Stop: Losing money on every customer. Fix model or pivot. |
| 1:1 - 2:1 |
>12 months |
Caution: Marginal economics. Don't scale yet. Improve retention or reduce CAC. |
| 2:1 - 3:1 |
6-12 months |
Optimize: Unit economics acceptable. Focus on improving before scaling. |
| 3:1 - 5:1 |
<12 months |
Scale: Good economics. Can profitably invest in growth. |
| >5:1 |
<6 months |
Aggressive scale: Excellent economics. Raise capital, increase spend rapidly. |
Inputs required:
- Revenue data: Pricing, ARPU, AOV, transaction frequency
- Cost data: Sales/marketing spend, COGS, variable costs per customer
- Retention data: Churn rate, cohort retention curves, repeat purchase behavior
- Channel data: CAC by acquisition channel, LTV by segment
- Time period: Cohort definition (monthly, quarterly), historical data range
Outputs produced:
unit-economics-analysis.md: Full analysis with CAC, LTV, ratios, cohort breakdownscohort-retention-table.csv: Retention curves by cohortchannel-profitability.csv: CAC and LTV by acquisition channelrecommendations.md: Pricing, channel, growth recommendations based on metrics
1---2name: financial-unit-economics3description: Use when evaluating business model viability, analyzing profitability per customer/product/transaction, validating startup metrics (CAC, LTV, payback period), making pricing decisions, assessing scalability, comparing business models, or when user mentions unit economics, CAC/LTV ratio, contribution margin, customer profitability, break-even analysis, or needs to determine if a business can be profitable at scale.4---5# Financial Unit Economics
6
7## Table of Contents
8- [Purpose](#purpose)
9- [When to Use](#when-to-use)
10- [What Is It?](#what-is-it)
11- [Workflow](#workflow)
12- [Common Patterns](#common-patterns)
13- [Guardrails](#guardrails)
14- [Quick Reference](#quick-reference)
15
16## Purpose
17
18Financial Unit Economics analyzes the profitability of individual units (customers, products, transactions) to determine if a business model is viable and scalable. This skill guides you through calculating key metrics (CAC, LTV, contribution margin), interpreting ratios, conducting cohort analysis, and making data-driven decisions about pricing, marketing spend, and growth strategy.
19
20## When to Use
21
22Use this skill when:
23
24- **Business model validation**: Determine if startup/new product can be profitable at scale
25- **Pricing decisions**: Set prices based on target margins and customer economics
26- **Marketing spend**: Assess ROI of acquisition channels, optimize CAC
27- **Growth strategy**: Decide when to scale (raise funding, increase spend) based on unit economics
28- **Product roadmap**: Prioritize features that improve retention or reduce churn (increase LTV)
29- **Investor pitch**: Demonstrate business model viability with CAC, LTV, payback metrics
30- **Channel optimization**: Compare profitability across customer segments or acquisition channels
31- **Subscription models**: Analyze recurring revenue, churn, cohort retention curves
32- **Marketplace economics**: Model take rate, supply/demand side economics, liquidity
33- **Financial planning**: Forecast cash flow, runway, burn rate based on unit economics
34
35Trigger phrases: "unit economics", "CAC/LTV", "customer acquisition cost", "lifetime value", "contribution margin", "payback period", "customer profitability", "break-even", "cohort analysis", "is this business viable?"
36
37## What Is It?
38
39**Financial Unit Economics** is the practice of measuring profitability at the most granular level (per customer, product, or transaction) to understand if revenue from a single unit exceeds the cost to acquire and serve it.
40
41**Core components**:
42- **CAC (Customer Acquisition Cost)**: Total sales/marketing spend ÷ new customers acquired
43- **LTV (Lifetime Value)**: Revenue from customer over their lifetime minus variable costs
44- **Contribution Margin**: (Revenue - Variable Costs) ÷ Revenue (as %)
45- **LTV/CAC Ratio**: Measures return on acquisition investment (target: 3:1 or higher)
46- **Payback Period**: Months to recover CAC from customer revenue
47- **Cohort Analysis**: Track metrics over time for customer groups (by acquisition month/channel)
48
49**Quick example:**
50
51**Scenario**: SaaS startup, subscription model ($100/month), analyzing unit economics.
52
53**Metrics**:
54- **CAC**: $20k marketing spend, 100 new customers → CAC = $200
55- **Monthly revenue per customer**: $100
56- **Variable costs**: $20/customer/month (hosting, support)
57- **Gross margin**: ($100 - $20) / $100 = 80%
58- **Monthly churn**: 5% → Average lifetime = 1 / 0.05 = 20 months
59- **LTV**: $100 revenue × 20 months × 80% margin = $1,600
60- **LTV/CAC**: $1,600 / $200 = 8:1 ✓ (healthy, >3:1)
61- **Payback period**: $200 CAC ÷ ($100 × 80% margin) = 2.5 months ✓ (good, <12 months)
62
63**Interpretation**: Strong unit economics. Each customer generates 8× their acquisition cost. Can profitably scale marketing spend. Payback in 2.5 months means fast capital recovery.
64
65**Core benefits**:
66- **Early warning system**: Detect unsustainable business models before scaling losses
67- **Data-driven growth**: Know when unit economics justify increasing spend
68- **Channel optimization**: Identify which acquisition channels are profitable
69- **Pricing power**: Quantify impact of price changes on profitability
70- **Investor confidence**: Demonstrate path to profitability with clear metrics
71
72## Workflow
73
74Copy this checklist and track your progress:
75
76```
77Unit Economics Analysis Progress:
78- [ ] Step 1: Define the unit
79- [ ] Step 2: Calculate CAC
80- [ ] Step 3: Calculate LTV
81- [ ] Step 4: Assess contribution margin
82- [ ] Step 5: Analyze cohorts
83- [ ] Step 6: Interpret and recommend
84```
85
86**Step 1: Define the unit**
87
88What is your unit of analysis? (Customer, product SKU, transaction, subscription). See [resources/template.md](resources/template.md#unit-definition-template).
89
90**Step 2: Calculate CAC**
91
92Total acquisition costs (sales + marketing) ÷ new units acquired. Break down by channel if applicable. See [resources/template.md](resources/template.md#cac-calculation-template) and [resources/methodology.md](resources/methodology.md#1-customer-acquisition-cost-cac).
93
94**Step 3: Calculate LTV**
95
96Revenue over unit lifetime minus variable costs. Use cohort data for retention/churn. See [resources/template.md](resources/template.md#ltv-calculation-template) and [resources/methodology.md](resources/methodology.md#2-lifetime-value-ltv).
97
98**Step 4: Assess contribution margin**
99
100(Revenue - Variable Costs) ÷ Revenue. Identify levers to improve margin. See [resources/template.md](resources/template.md#contribution-margin-template) and [resources/methodology.md](resources/methodology.md#3-contribution-margin-analysis).
101
102**Step 5: Analyze cohorts**
103
104Track retention, LTV, payback by customer cohort (acquisition month/channel/segment). See [resources/template.md](resources/template.md#cohort-analysis-template) and [resources/methodology.md](resources/methodology.md#4-cohort-analysis).
105
106**Step 6: Interpret and recommend**
107
108Assess LTV/CAC ratio, payback period, cash efficiency. Make recommendations (pricing, channels, growth). See [resources/template.md](resources/template.md#interpretation-template) and [resources/methodology.md](resources/methodology.md#5-interpreting-unit-economics).
109
110Validate using [resources/evaluators/rubric_financial_unit_economics.json](resources/evaluators/rubric_financial_unit_economics.json). **Minimum standard**: Average score ≥ 3.5.
111
112## Common Patterns
113
114**Pattern 1: SaaS Subscription Model**
115- **Key metrics**: MRR, ARR, churn rate, LTV/CAC, payback period, CAC payback
116- **Calculation**: LTV = ARPU × Gross Margin % ÷ Churn Rate
117- **Benchmarks**: LTV/CAC ≥3:1, Payback <12 months, Churn <5% monthly (B2C) or <2% (B2B)
118- **Levers**: Reduce churn (increase LTV), upsell/cross-sell (increase ARPU), optimize channels (reduce CAC)
119- **When**: Subscription business, recurring revenue, retention critical
120
121**Pattern 2: E-commerce / Transactional**
122- **Key metrics**: AOV (Average Order Value), repeat purchase rate, contribution margin per order, CAC
123- **Calculation**: LTV = AOV × Purchase Frequency × Gross Margin % × Customer Lifetime (years)
124- **Benchmarks**: Contribution margin ≥40%, Repeat purchase rate ≥25%, LTV/CAC ≥2:1
125- **Levers**: Increase AOV (bundling, upsells), drive repeat purchases (loyalty programs), reduce variable costs
126- **When**: Transactional business, e-commerce, retail
127
128**Pattern 3: Marketplace / Platform**
129- **Key metrics**: Take rate, GMV (Gross Merchandise Value), supply/demand CAC, liquidity
130- **Calculation**: LTV = GMV per user × Take Rate × Gross Margin % ÷ Churn Rate
131- **Benchmarks**: Take rate 10-30%, LTV/CAC ≥3:1 for both sides, network effects kicking in
132- **Levers**: Increase take rate (value-added services), improve matching (increase GMV), balance supply/demand
133- **When**: Two-sided marketplace, platform business
134
135**Pattern 4: Freemium / PLG (Product-Led Growth)**
136- **Key metrics**: Free-to-paid conversion rate, time to convert, paid user LTV, blended CAC
137- **Calculation**: Blended LTV = (Free users × Conversion % × Paid LTV) - (Free user costs)
138- **Benchmarks**: Conversion ≥2%, Time to convert <90 days, Paid LTV/CAC ≥4:1
139- **Levers**: Increase conversion rate (improve product, optimize paywall), reduce time to value, lower CAC via virality
140- **When**: Product-led growth, freemium model, viral product
141
142**Pattern 5: Enterprise / High-Touch Sales**
143- **Key metrics**: CAC (including sales team costs), sales cycle length, NRR (Net Revenue Retention), LTV
144- **Calculation**: LTV = ACV (Annual Contract Value) × Gross Margin % × Average Customer Lifetime (years)
145- **Benchmarks**: LTV/CAC ≥3:1, Sales efficiency (ARR added ÷ S&M spend) ≥1.0, NRR ≥110%
146- **Levers**: Shorten sales cycle, increase ACV (upsell, premium tiers), improve retention (NRR)
147- **When**: Enterprise sales, high ACV, long sales cycles
148
149## Guardrails
150
151**Critical requirements:**
152
1531. **Fully-loaded CAC**: Include all acquisition costs (sales salaries, marketing spend, tools, overhead allocation). Underestimating CAC makes unit economics look better than reality. Common miss: excluding sales team salaries.
154
1552. **True variable costs**: Only include costs that scale with each unit (COGS, hosting per user, transaction fees). Don't include fixed costs (rent, core engineering). LTV calculation requires accurate margin.
156
1573. **Cohort-based LTV**: Don't average across all customers. Early cohorts ≠ recent cohorts. Track retention curves by cohort (acquisition month/channel). LTV should be based on observed retention, not assumptions.
158
1594. **Time horizon matters**: LTV is a prediction. Use conservative assumptions. For new products, LTV estimates are unreliable (insufficient data). Weight recent cohorts more heavily.
160
1615. **Payback period vs. LTV/CAC**: Both matter. High LTV/CAC but long payback (>18 months) strains cash. Fast payback (<6 months) allows rapid reinvestment. Optimize for both.
162
1636. **Channel-level analysis**: Blended metrics hide truth. CAC and LTV vary by channel (paid search vs. referral vs. content). Analyze separately to optimize spend.
164
1657. **Retention is king**: Small changes in churn have exponential impact on LTV. Improving monthly churn from 5% to 4% increases LTV by 25%. Retention improvements > acquisition improvements.
166
1678. **Gross margin floor**: Need ≥60% gross margin for SaaS, ≥40% for e-commerce to be viable. Low margin means high LTV/CAC ratio still yields poor cash flow.
168
169**Common pitfalls:**
170
171- ❌ **Ignoring churn**: Assuming customers stay forever. Reality: churn compounds. Use cohort retention curves.
172- ❌ **Vanity LTV**: Using unrealistic retention (e.g., 5 year LTV with 1 month of data). Stick to observed behavior.
173- ❌ **Blended CAC**: Mixing profitable and unprofitable channels. Break down by channel, segment, cohort.
174- ❌ **Not updating**: Unit economics change as product, market, competition evolve. Re-calculate quarterly.
175- ❌ **Missing costs**: Forgetting support costs, payment processing fees, fraud losses, refunds. Track everything.
176- ❌ **Premature scaling**: Growing before unit economics work (LTV/CAC <2:1). "We'll make it up in volume" rarely works.
177
178## Quick Reference
179
180**Key formulas:**
181
182```
183CAC = (Sales + Marketing Costs) ÷ New Customers Acquired
184
185LTV (subscription) = ARPU × Gross Margin % ÷ Monthly Churn Rate
186
187LTV (transactional) = AOV × Purchase Frequency × Gross Margin % × Lifetime (years)
188
189Contribution Margin % = (Revenue - Variable Costs) ÷ Revenue
190
191LTV/CAC Ratio = Lifetime Value ÷ Customer Acquisition Cost
192
193Payback Period (months) = CAC ÷ (Monthly Revenue × Gross Margin %)
194
195CAC Payback (months) = S&M Spend ÷ (New ARR × Gross Margin %)
196
197Gross Margin % = (Revenue - COGS) ÷ Revenue
198
199Customer Lifetime (months) = 1 ÷ Monthly Churn Rate
200
201MRR (Monthly Recurring Revenue) = Sum of all monthly subscriptions
202
203ARR (Annual Recurring Revenue) = MRR × 12
204
205ARPU (Average Revenue Per User) = Total Revenue ÷ Total Users
206
207NRR (Net Revenue Retention) = (Starting ARR + Expansion - Contraction - Churn) ÷ Starting ARR
208```
209
210**Benchmarks (varies by stage and industry):**
211
212| Metric | Good | Acceptable | Poor |
213|--------|------|------------|------|
214| **LTV/CAC Ratio** | ≥5:1 | 3:1 - 5:1 | <3:1 |
215| **Payback Period** | <6 months | 6-12 months | >18 months |
216| **Gross Margin (SaaS)** | ≥80% | 60-80% | <60% |
217| **Gross Margin (E-commerce)** | ≥50% | 40-50% | <40% |
218| **Monthly Churn (B2C SaaS)** | <3% | 3-7% | >7% |
219| **Monthly Churn (B2B SaaS)** | <1% | 1-3% | >3% |
220| **CAC Payback (SaaS)** | <12 months | 12-18 months | >18 months |
221| **NRR (SaaS)** | ≥120% | 100-120% | <100% |
222
223**Decision framework:**
224
225| LTV/CAC | Payback | Recommendation |
226|---------|---------|----------------|
227| <1:1 | Any | **Stop**: Losing money on every customer. Fix model or pivot. |
228| 1:1 - 2:1 | >12 months | **Caution**: Marginal economics. Don't scale yet. Improve retention or reduce CAC. |
229| 2:1 - 3:1 | 6-12 months | **Optimize**: Unit economics acceptable. Focus on improving before scaling. |
230| 3:1 - 5:1 | <12 months | **Scale**: Good economics. Can profitably invest in growth. |
231| >5:1 | <6 months | **Aggressive scale**: Excellent economics. Raise capital, increase spend rapidly. |
232
233**Inputs required:**
234- **Revenue data**: Pricing, ARPU, AOV, transaction frequency
235- **Cost data**: Sales/marketing spend, COGS, variable costs per customer
236- **Retention data**: Churn rate, cohort retention curves, repeat purchase behavior
237- **Channel data**: CAC by acquisition channel, LTV by segment
238- **Time period**: Cohort definition (monthly, quarterly), historical data range
239
240**Outputs produced:**
241- `unit-economics-analysis.md`: Full analysis with CAC, LTV, ratios, cohort breakdowns
242- `cohort-retention-table.csv`: Retention curves by cohort
243- `channel-profitability.csv`: CAC and LTV by acquisition channel
244- `recommendations.md`: Pricing, channel, growth recommendations based on metrics
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